Qualifying R&D Tax Credits – How do Accountants Recognise R&D?
Recognising where R&D might exist for tax credit purposes!
RandDTax offers free workshops for accountancy practices to address the issue that many accountancy practices could do more to recognise where R&D is being done by their clients. Details can be found in our brochure RandDTax Accountants Brochure.pdf
Are any of your clients already claiming R&D tax credit relief in the UK? If you answered “YES”, are you confident they have claimed the full value of their qualifying R&D spend. If you answered “NO”, are you sure you are not missing R&D that is being done by your clients?
We have found that many companies have under-claimed. In some cases, our free audit has uncovered additional qualifying expenditure that uplifts previous claims by as much as 200% and these uplift claims can still be made inside the 2 year qualifying period.
It is very easy for companies to misunderstand and often be discouraged by the HMRC Guidelines, although HMRC have tried to keep them simple. It is also easy for clients to be discouraged by the free advice from the HMRC R&D Tax Credit special units, not because HMRC are doing a bad job, on the contrary they are very helpful. It is simply that sometimes the level of knowledge within the company is not sufficient and more work is needed to uncover and understand the scope of any R&D they may be doing.
In our experience R&D can be undertaken in virtually every industry. With R&D Tax Credits the government wanted to encourage companies to innovate. The claim process is straightforward and the rewards are significant.
If a company has invested in the development of software they might qualify, and in my experience people will often underestimate the scope of the claim. Part of the reason is misunderstanding the scope of words in the Guidelines.
Many companies have been told things like “Programming is not R&D” or “developing websites is not R&D”. Neither statement is totally right or totally wrong, but serious misconceptions exist.
Questions to Ask
Are you the owner of an SME or do you have SMEs as your clients and you want to know if qualifying R&D is being undertaken? Then look back at the last three years and ask yourself these questions:
- Has the company created any new or enhanced any existing products?
- Has the company undertaken any work to improve processes?
- For service organisations, have any projects been undertaken to improve those services in order to either: reduce costs, win more business or improve service levels.
If your answer to any of the above questions is yes, we suggest you talk to one of our specialists to check out whether the company may qualify for R&D tax credits. Or if you are an accountancy practice request a workshop – at our workshops we go into more detail on what qualifies as R&D for tax purposes, so that you are better able to recognise when R&D is being carried out by your clients.