Speaking as specialists who support and collaborate with hundreds of accountants and accounting firms, and submit over 2,000 successful R&D claims every year, we encounter many different ways of working all purporting to achieve the same outcome of an effective and optimised R&D tax credits claim.
Whether considering ourselves or other practitioners, we all know that an optimised (as opposed to maximised) claim is one which gains the best level of tax relief for a client while clearly adhering to current R&D tax legislation, and “pushing the envelope” is only for risk-takers who want to end up tied in knots with HMRC.
If we put ourselves in a client’s shoes, particularly one who has never made a claim before, R&D tax relief is a highly attractive proposition and the basic options for making a claim are:-
But with so much choice which option provides the best experience?
Many clients are highly motivated to claim R&D tax credits, and some try and do claims themselves or use self-claim software, which appears attractive as it promises low costs and simplicity.
In reality, both place the burden of understanding and positioning R&D activity on the client and software offers no support in writing an effective technical narrative or correctly evaluating qualifying expenditure.
You should, if possible, encourage your clients not to use either approach. This is part of your duty of care, and not just to earn fees, as they are likely to result in an ineffective claim with a low level of service and support and increase rather than reduce their risk.
Also, you should recommend they review the small print as software only providers often place the risk for an accurate claim on the end user and provide no support. This can be a good example of “buy cheap, buy twice”…
Engage your external accountant
Many accountants make R&D tax credit claims on behalf of their clients and some prefer this approach as it means they can provide a joined up, end to end client service. Across a typical SME client portfolio, we would expect 10-20% of corporate clients to be making formal R&D claims but we rarely see this level of coverage.
On the whole, accountants do a very solid job, though if claim volumes are low it is hard to build a robust and repeatable process, and claims can become time-consuming and deflect resources away from other tasks.
Also, given most client portfolios include clients from various sectors with no critical mass, it is difficult to build sector-specific knowledge and expertise to stay current with technological developments.
If this is your situation, you clearly have an obligation to provide a professional service to your clients and, as member of a professional body, to ensure you have the capability and specialist expertise within your firm which you need to deliver a quality service while managing your engagement risk.
If you do offer R&D tax credit services using your own team you too may be considering an investment in software to improve your service. Our advice is to think twice, as ultimately what get for your investment is the automation of some parts of the claim process, removing some administrative burden, and potential time savings, but the “secret sauce” is still down to you.
While R&D software might give you added capacity, it doesn’t replace the consulting skills required to understand your clients’ business activity and investment and translate it into getting their just rewards in terms of tax relief. The most valuable and most time-consuming part of a claim currently defies automation.
In summary, automation is a good idea in theory but misses the mark and the best service stems for collaborating with a specialist firm you can trust to work with you for the benefit of your clients.
Engage another external accountant
From your own perspective, you clearly want to avoid this where possible. Many accountants now use R&D tax credits as an active door opener and, understandably, other accountants are concerned about losing clients to them. If you don’t actively promote R&D tax credits as a service line, it’s highly likely a direct rival will, either using their own resources or partnering with a specialist.
I know this as I have personally run several very successful new client marketing campaigns on this basis in a previous life and won many full-service clients and advisory engagements from an R&D bridgehead.
From the client’s perspective, they are much better served working with their existing accountant to receive the joined up, end to end client service mentioned above. This assumes, of course, you have the expertise or connections to deliver the service.
Work with an R&D specialist
Many accountants regret the existence of R&D specialists but they/we have a place in the market and many do provide a high-quality service, trading on the fact they are specialists and either do a better job than accountants or do not tread on their toes.
They come in all shapes and sizes and many are under pressure from VCs to grow aggressively, leading to bombardment marketing with a simple and often exaggerated message. Under these circumstances, clients can migrate to the most attractive sounding offer with no concept of the potential consequences.
Caveat emptor should be the message of the day. In particular, if anybody offers very low prices to clients, basic maths says they will need to trim their service levels to make a profit.
Or, to butcher Dr Johnson, “anybody can provide a worse service for less money”…
Accountants owe it their clients to protect them by offering an R&D service themselves either in-house or in collaboration with a trusted partner. The question is how do you find a partner with if you want one?
In a nutshell, a trusted partner needs to be credible, reliable and looking to work on a “win-win-win” basis: winning for the client, for you and for themselves.
For the client this means providing a good quality service and good value for money in line with your own established values and way of working.
And for you this means working together not in silos, transparency and helping you enhance your own client engagement, either in terms of financial return and/or client satisfaction.
Working with Catax!
If you’re still thinking about working with us and this strikes a chord, please get in touch about our flexible accountancy partner programme by clicking here or alternatively, email firstname.lastname@example.org.
If you’re already on board, feel free to get in touch anyway as we’re always happy to talk and help if we can.