Updated: Jan 27
‘No win no fee,’ ‘Dynamic pricing’ ‘No upfront costs,’ ‘Contingent fees to success,’ ‘Get in touch’
Written by Asif Hussain, Managing Director at Novus Tax.
Not too long ago in a Zoom meeting regarding a website audit, the much-dreaded word ‘pricing’ was brought up. In my line of work as an R&D tax consulting specialist, unlike with products, pricing is not so straightforward. In fact, to my knowledge, very few specialist R&D companies openly disclose their pricing on company websites or brochures. I was quick to dismiss the concept because it’s just generally something that is not done.
It was suggested I read a book called ‘They Ask, You Answer’ which highlights the importance of building trust online.
Consumers are intelligent. With digital disruption, the internet has completely changed the way that people buy online. There are many studies that highlight how much research a consumer carries out before making a purchasing decision, also linked to a concept of ‘high involvement/low involvement’ and ‘perceived risk’ – certainly, Novus Tax’s services could fall under a high involvement, high perceived risk category. When people want to make informed decisions, they want information that is transparent and the number one (or top three) information they look for is price.
I thought long and hard: why is nobody in this industry addressing this?
And as a founder of a company whose values are centred in honesty and trust, I finally decided to publicly disclose some of the pricing structures you could encounter as a customer, and the one I use with Novus Tax.
Addressing the elephant in the room
As a rule of thumb, any content related to marketing or sales focuses very much solely on strengths, unique selling points, and value to address any problems in a positive fashion. Eliminating customer fear or uncertainty is conducive to building trust, and in the spirit of honesty perhaps instead of talking about the beautiful painting on the wall I should address the elephant in the room.
In my experience, there are three main factors that really influence a customer’s choice, in varying degrees.
The first, is the service they are looking for. I have no doubt that if you research different R&D tax consulting companies, they will describe pretty much the same type of services. After all, it’s a claim made to HMRC on your behalf, how much can we really differentiate that? In reality though, not every service will be the same because it is purely subjective of the technical writer’s point of view. You could say it’s a bit of a gamble: you’re putting your faith into the teams’ ability to spot and justify your costs as qualifying R&D expenditure to maximise your claim. So how can you reduce the risk and pick the right one? It starts with trust and experience. Actions speak louder than words, and the best R&D specialists are eager to show you their skills. That’s why some of them offer free technical assessments.
To really describe how the service can differ, imagine two companies who offer the exact same service. They have worked with different clients from a range of industries. If Company A has had more clients from the Computer Software Industry, chances are they have experience and a better understanding of qualifying costs than Company B who hasn’t dealt with anything related. On the flip case, Company B could take a look with a fresh perspective and in fact spot and justify costs Company A had not considered before.
The second, is how much they are willing to pay for that service, and where they can find the cheapest price. After all, one of the top objectives of any company is to make money, and cutting costs increases efficiency.
The third, is the time/effort. Yes, we all generally favour one stop shops and no, we don’t want to spend too much time choosing the right service provider because at some point, you might end up spending more time doing this than the time it takes to actually receive the service (which for our company is an average of 3.5 hours of your time).
The skills that a company offers are not tangible and each claim that is created is unique which is why it can be harder for a business to communicate these and a customer to differentiate between them. Often clients assume they are getting the same service and base their decision more on price.
Why is pricing not publicly disclosed?
I can’t speak to any other company’s intentions behind this decision, but I can speak to mine.
The pricing is not set in stone. When I started Novus Tax, my sole intention was creating mutual value, for my customers and I, so that we always win together or don’t win at all. There is something alluring about honest business structures, and I trusted that this would captivate and cultivate the company.
While we charge an average standard, this can very much change case by case. For very large claims, it is not feasible to ask for a fee that will be unreasonably high. On the flip side, to survive as a business we need to be able to cover the cost of carrying out a claim.
Regardless, as I will describe in more detail in the rest of the article, the fee will always be relative to what you benefit at a rate that is initially discussed and agreed upon to reach a fair outcome for everyone involved.
The industry’s top pricing structures
These are some of the pricing structures that I have come across within my eight years of working in the industry:
With this type of structure, a company will quote you a set price. This sounds straightforward, simple and predictable.
It could be a bit of a gamble, because there is no guarantee that the benefit you receive from HMRC will be more than the cost. In fact, it’s harder to understand the reward relative to the cost, and you could end up paying more. Or you could end up paying less. As it’s not contingent on anything, this would need to be assessed case by case.
An example is £3000.
With admin fees or upfront fees, a company may charge you an initial fee to start your claim and a percentage at the end. This can be beneficial in some ways as it splits up the payments, possibly making it easier to manage the cost. The percentage quoted at the end will generally be lower than a company who, for example, charges just a percentage fee. What you have to be careful here is that both the upfront and the percentage should add up to a reasonable overall fee. There could also be a scenario where you pay an upfront admin fee for a technical assessment and end up with no benefit because there is no claim.
You may be charged something like a £1500-£3000 upfront fee plus a 10-15% at the end of the benefit received from HMRC.
Quite a few companies offer more specific consulting services rather than an end-to-end service.
These are generally quoted as cheaper. For example, I’ve come across some external accounting companies offering R&D tax services, predominantly based on an online platform, who will – once a client themselves have written a report – check their accounting records and the report to ‘sign off’ that the information in the report is correct, correlating to the figures provided by the client. The client’s accountant will then file the report with HMRC.
You can hear figures around 12% for this service, ranging up to about 18%, of the benefit received from HMRC. What is omitted is that, possibly (a) clients themselves would be responsible for identifying qualifying costs and in doing so are likely to miss expenditure compared to if an R&D tax specialist were to look at a company’s records, (b) reports require appropriate and adequate narrative to describe the eligible R&D’s nature and justify any costs, as the client’s responsibility, not doing so significantly increases the risk of an enquiry being made into the claim by HMRC, and (c) the company providing the consulting service take no responsibility for the information you have provided and filing the claim.
You can reduce your fee if the service you require is not comprehensive. This may be ideal for people who have experience and are looking for support in a particular area.
You will most likely encounter the next two pricing structures when signing on to work with an R&D specialist tax consulting company.
Qualifying R&D expenses identified
With this structure, commonly you can expect the company to raise an invoice upon a successful claim following an end-to-end service. The main differentiator between this and the next is what the percentage fee is based on. The identified qualifying R&D expenses is the total of qualifying R&D expenditure that the client incurred as a result of their R&D activities plus the government uplift, depending on whether you are a profit or loss-making SME or large company. Generally, you can expect to be quoted something downward of 7%.
Also contingent on a successful claim and commonly through an end-to-end service, this structure is based on the very last figure you will encounter: what you actually receive back from HMRC. In this case, your identified qualifying R&D expenditure is calculated, an uplift is applied, the Corporation Tax reduction or relief is calculated, and you end up with a final number for your rebate. A percentage fee is applied to this number for the invoice. With this structure, the industry average you can expect is 20-25%, although it can go up to 40% in some cases.
The Novus Tax pricing
Now that you understand the differences between the most popular pricing structures and a rough idea of the numbers, we can go into more detail about the fees at Novus Tax.
We charge our clients on the benefit that they receive from HMRC, at the industry standard of 25%.
Let’s put it into context and explain the reasoning behind this. As a disclaimer, this is a loose example for explanation purposes.
For a company who has spent £100,000 worth of qualifying R&D expenditure, with an ‘expenses identified’ structure, 7% is applicable to this figure plus the uplift. In theory, for a loss-making SME this will be £230,000 and for a profit-making SME this would be £130,000. 7% fees gives an estimated £9,100 - £16,100 bracket.
For £100,000 qualifying R&D expenditure, an SME can expect a benefit as a 18%-33% return depending on whether they are a trading-loss, profit-making or loss-making company. The benefit they could stand to receive can be roughly between £18,000 to £33,000. Now when you apply our industry average 25% fee, they will be paying roughly £4,500 to £8,250.
You can see that although 25% sounds like more, it is noticeably cheaper than the first example. This is true for anything upwards of around 3.5% of expenses identified.
For a more predictable and fair structure, Novus Tax charges at the very end so there will never be a situation where you are paying an unreasonable fee compared to what you actually ended up receiving from HMRC, or out of pocket.
The price is not set in stone. While 25% is our standard to ensure we cover the cost of making an average claim, our pricing can be flexible for unique cases to reach a fair balance. To offer adjustable and responsive rates, we avoided disclosing a fixed number in the past. Moving forward, I am convinced that providing an indication may be highly beneficial for anyone interested in making a claim to make an informed decision about using our services.
Innovation happens when people have ideas and have the resources to bring these to life. Funding R&D projects is vital for many companies’ core structures and so claiming R&D tax relief can be an important source of future funding for you.
I would encourage any prospective looking to make their first claim or anyone not 100% satisfied with any past or ongoing claims to do their research. There are a wide range of companies offering differing services to cater for each individual’s needs, and often a short telephone conversation can give you an indication of the cost you can expect.
A last note to add in terms of pricing is the centuries long discussion of price vs. quality. Basing your decision solely on the cheapest service can cost you more in the long run as the service you receive may not be in your company’s best interest. It’s always a good idea to find out the exact service a company offers and weigh up the cost relative to that – the subjective nature really means not every company will be able to maximise the benefit you can claim.