Introduction:
Claiming R&D tax credits can be a daunting and often complex process for companies, yet they remain pivotal in supporting and incentivising innovation within the UK for businesses of all size. RCK Partners’ R&D claim process is underpinned by a client-centric approach, designed to be as streamlined and secure as possible. It helps clients navigate the complexities of HMRC’s eligibility criteria both accurately and efficiently, in turn helping to minimise their tax liability through either a reduction in taxpaid on profits or a cash injection into the business.
Determining Eligibility and Claim Process:
To determine whether a company is eligible to claim R&D tax credits, a discovery call will first take place with one of our commercial specialists. This will enable the viability of a claim to be assessed, determined by both the operational expenditure incurred by the business and projects they have undertaken in the previous two accounting periods. If eligible, RCK will match the client with a technical consultant from our team, who will engage the prospective client in a three-step claim process, typically taking three hours of a clients’ time:
1) Handover Call: cover company due diligence; outline HMRC’s definition of R&D; map out the R&D process in further detail; and discuss at a high level potentially qualifying projects.
2) Technical Scoping Call: in-depth discussion of qualifying R&D projects, informing the case studies and narrative used within our technical report submitted to HMRC.
3) Costing Call: Working out the percentage of R&D which can be associated to the operational expenditure incurred by the business, in turn determining total R&D tax credit benefit.
Identifying Qualifying Technical R&D Projects:
One of the biggest hurdles in claiming R&D tax relief credits is determining eligible projects. The guidance provided by HMRC states that R&D for tax purposes takes place when a project "seeks to achieve an advance in science or technology”, where the work done seeks this advance through “the resolution of scientific or technological uncertainty” that is not readily deducible to a competent professional within the field. This also includes activities related to the project in support of it, known as qualifying indirect activities.
In summary, this can be more readily understood as projects undertaken that look to achieve innovative solutions in a field where readily available or commonly adopted strategies and processes are not sufficient. These projects often require experimentation of new systems, technologies not usually utilised in a given field, or a fundamental redesign of a process to match the output of another technology.
The role of the technical consultant assigned to the claim process is to help the company identify areas in which they can claim. The claim process is broken down into a simpler set of questions for the client, allowing them to critically evaluate the work they have done and the results they have seen. This is supported by an analysis of the relevant state-of-the-art literature to contextualise the project. Our technical consultants strive to develop strong client relationships in order to deliver a detailed and accurate assessment of our client’s innovation.
Identifying Qualifiable Costs:
R&D tax relief can be claimed on a range of expenses incurred by a company. These can be summarised in the following categories:
Staff Costs: The salaries, wages, employer national insurance contributions, and employer pension contributions for employers involved in R&D projects. Furthermore, travel expenses necessary for journeys related to R&D projects can be qualified.
Consumable Items: Costs relating to materials that are wasted, destroyed, or irreversibly converted during the R&D process. Notably, this includes prototypes scrapped during the R&D process, and electricity and water costs directly related to company operation on R&D projects.
Subcontracted R&D Work: Costs relating to R&D work outsourced to another company.
Externally Provided Workers: If a company engages with a third-party agency for direct work on R&D projects.
Software: Licenses for software necessary for the R&D work to take place.
During the costing call, our consultant will assess the R&D contribution of each cost incurred to determine the overall qualifying expenditure of the claim through discussion with the client to ensure that an accurate apportionment of costs relating to R&D is achieved. The consultant will then calculate the tax relief benefit for the company.
Why RCK?
When claiming R&D tax credits with RCK Partners, clients are matched to a specialist in-house technical consultant with a vocational and/or academic background within their industry. Using their relevant background and expertise, RCK’s consultants’ ability to accurately identify qualifying R&D projects and recognise the full scope of qualifying expenses ensures a clients R&D tax relief benefit is maximised.
Following the collection of technical and financial information from client, a technical report and Additional Information Form(AIF) is compiled by the consultant and reviewed by RCK’s industry leading compliance team. Staffed with chartered accountants, tax advisors and ex-HMRC inspectors, their scrupulous attention to detail guarantees a fully legitimate claim process as they ensure each R&D claim submitted complies with HMRC guidelines and legislation. Given the upward trend of enquiries into R&D tax relief claims in recent years, having a trusted provider which places such emphasis on compliance and security is of paramount importance.
In addition to our compliance function, RCK’s appointment of Lord Philip Hammond as a Senior Advisor to the business last summer has helped us to better understand and support our clients in an ever evolving and turbulent tax landscape. As former Foreign Secretary (2014-2016) and Chancellor of the Exchequer (2016-2019), Lord Hammond has advised the business on both macroeconomic factors within the marketplace and provided un-paralleled insight into the political philosophies which are fundamental in creating and shaping R&D tax credit legislation.
Conclusion:
Claiming R&D tax credits is not only crucial in supporting and incentivising companies to invest in research and development, but the wider UK economy as it strives to become a global leader in innovation. Given this importance, claiming with a specialist provider such as RCK Partners is imperative for companies which prioritize a best-in-class service and a fully secure, compliant R&D claim process.
Co-written by Andy Brown (Senior Commercial Executive) and Jack Herrington (Associate Consultant).
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