If you’re thinking about filing an R&D tax credit claim for the first time or you’re considering switching from an accountant/company you’re currently claiming with, there are a few important things you should ask an R&D tax specialist company before you chose to use their services.
Free assessments: am I eligible and what kind of benefit can I expect?
The first topic of conversation should predominantly regard eligibility. According to government statistics, more than 90% of eligible SMEs are not claiming for R&D tax relief, highlighting the existence of misconceptions about qualifying R&D activities or a lack of knowledge or appeal to filing a claim.
As R&D tax credits is an area of tax which can be subjective, I recommend getting in contact with a few different specialists before completely ruling out that your company is not eligible. I have worked with clients in the past who were told they did not have a claim to make but in fact their accountants or R&D tax specialists had failed to look into the company in enough detail and find the right information, or have a deep enough understanding about qualifying expenditure.
Some R&D tax specialists offer free assessments which not enough companies make use of. Getting a few assessments from different R&D tax specialists is a great way to gauge which company is right for you. Some of the things to look out for is the level of engagement and effort, experiences they have with companies in a similar industry to yours and the kind of qualifying costs they think are eligible. A specialist should be able to give you an estimate of the kind of benefit you can look to receive before you sign on to work with them.
It genuinely stumps me how reluctant companies are to make use of free assessments. Even if an R&D tax specialist confirms there is in fact a claim to be made, generally you are under no obligation to claim with them. This is also true for companies who are already making claims and are interested to see if they have in fact claimed the maximum amount they are entitled to. I cannot stress how important this service is, at no cost to you except your time.
The services they offer: what is your process and what do you offer?
After getting some free assessments and confirming that you are in fact eligible to make a claim, or there are missed expenses from past claims, the next most important question to ask is the services that the R&D tax specialist company offer. These can greatly differ. Some R&D tax specialists offer remarkable services and processes which require minimal effort on your end. Some companies require the client to get more involved and share the risk. Here is a list of some of the services you can receive from an R&D tax specialist and things to look out for:
1. Going through your company’s accounts to spot and justify all qualifying R&D activities to maximise the claim. This is one of the most crucial differentiators for deciding to work with a specialist in the first place. An R&D tax specialist will be experienced and likely to identify and justify more expenses leading to a higher benefit value.
2. Writing a report on your behalf. An R&D tax specialist will have more experience writing a report in a way that has a higher chance of success. The way the report is written is crucial as it needs to meet HMRC’s requirements, i.e., describing the advance in science and technology that was sought, how the project achieved this, and how the costs associated were an imperative part of the R&D process.
3. Filing the report with HMRC on your behalf. Some R&D tax specialists will retain ownership over the reports that they write. This means that they take on all the liability. HMRC can investigate any claims made in the past six years, so if you use an R&D tax specialist who file the report on your behalf, they are responsible and liable for them in that time frame.
4. Dealing with any HMRC enquiries. Rarely, enquiries can be made into claims that are filed. These can be as minor as clarifications or as serious as full investigations for misclaiming. Some R&D specialists will deal with HMRC directly regarding any enquiries. You might also want to ask about which kind of insurances they have in place, like PI. This will minimise any risk to you or your company.
5. Filing your claim quickly. This one is self-explanatory; you generally want a claim to be filed quickly so you can receive your benefit as soon as possible. Once you get the right information to the team handling your claim, you want to know that the turnaround for a completed report is quick to minimise the time it takes HMRC to pay out your claim.
6. How you will receive the benefit of a successful claim. Some R&D tax specialists filing on your behalf may receive the money on your behalf, and with others you can receive the cheque yourself.
7. How you are charged for the service. I will go into more detail on this in the next section.
8. Any after services the R&D tax specialists offer. Some companies will go on to offer advice for any future claims you may have. This can include explaining which relevant costs for your business qualify for R&D tax credits, so that in your future projects you can map out a plan to spend your money and record your expenses in a certain way to maximise your claim.
So, a key question to ask a specialist at this point is: what is your process and what services do you offer at each stage? Again, ask around at maybe the top three companies you like – presumably from the ones who have offered you a free assessment – to understand how each company works and which is the best fit for you. Feel free to even ask a company how they are different to one of their competitors you are considering.
Price: how much do you charge and how do you charge it?
I cannot stress how important this question is. Generally, you can’t find a figure until you get in contact with an R&D tax specialist and ask them specifically. There a few different pricing structures that various R&D tax specialists use so make sure you understand exactly what each one entails. Some of them include a flat/fixed rate, upfront/admin costs, specific consulting service rates, percentage fee on identified spend value and percentage fee on benefit value.
Prices are not publicly disclosed because they are flexible and responsive case by case. The only way you can compare prices is by getting quotes from different companies and weighing it up with the services they offer.
1. Advice for upfront fees: some R&D tax specialists may ask for an upfront fee to pay for the costs required to start your claims process. This is usually a fixed number. They will also most likely charge you a percentage at the end. Using an example figure, or your qualifying costs if you have had a free assessment, ask them for a rough indication for the charge you can expect at the end. Add these figures up together to get an estimation of your total cost. Often, splitting the payment will create a sense of paying less as these are spread apart. For reference, get a quote from another R&D specialist using a different pricing structure to make sure you are actually paying a better price.
2. Advice for flat/fixed rates: these kinds of rates can go either way. Fixed rates are not generally quoted based on the benefit you receive. This means that you could end up paying a lower fee compared to another company, or you could end up (in some rare cases) paying more than your claim value. What may also happen is that you end up paying more than a different pricing structure. If you really want to get the best price possible, you need to make sure you are aware of all possible charges, estimate the kind of return you expect from HMRC and compare your fee to a company charging a different pricing structure. One point that I’ve come across is that when a company charges a fixed rate, they may be less motivated to fully maximise your claim as they are being paid the same regardless. A percentage fee can incentivise an R&D tax specialist to make the best claim possible so that you receive a larger benefit.
3. Advice for any percentage fees: although they may all sound the same, percentage fees can be notably different depending on what they are based on. The main two are on ‘identified spend value’ and ‘benefit value’. The former refers to your company’s qualifying R&D spend (plus the government uplift which applies) while the latter refers to the benefit you receive from HMRC. In this case, ask the company to break it down for you and explain the exact method they will use to determine your fees. You can ask them to use your estimated qualifying R&D expenses – following a free assessment – to give you a better indication of what you can expect.
Be conscious of when you are expected to make payments and how this will fit into your company’s cashflow. Most R&D tax specialists do raise an invoice after the client receives their money from HMRC, and so in a way, you won’t be paying out of pocket.
And finally, prices can be negotiable depending on the circumstances. If you have a claim that is substantially large, you can reasonably ask a company to reduce their fees to reach a fair number. Successful R&D specialists realise it’s not about making the most profit from a single claim but building a trusting and valuable relationship with their clients for the long term.
Make sure you ask an R&D tax specialist company to tell you about all the costs you will encounter and read any contract/terms carefully so that you don’t end up paying more than what you were led to believe.
Time commitment: how much of my time will it take up?
This links back to the service but it’s worth mentioning separately. First, you’ll have to decide how involved you want to be in the process and how much time you’re willing to dedicate to it. Some R&D tax specialists will take it all off your hands so the time you spend can be around as little as 4 hours. Some will require you to be more hands on which can take up more of your time, time you could better dedicate to running your business. However, if you have previous experience writing or filing claims, it may be worth investing more time to reduce your fees. Though, I would recommend that when it comes to identifying qualifying expenditure, you have a specialist take a look at your costs. After all, that’s where the value in using an R&D tax specialist lies.
Terms of contract: how many years are you signing on for and what are the exit clauses?
Generally, most R&D tax specialists will offer a contract that state a number of years you will sign on to work with them for. This can be between three to five, however it changes from company to company. That is why it is essential to check and make sure you are happy before signing on.
Again, this is where free assessments come in to play. If you must make a commitment, you should be sure you’re going with the best company for you. Read all the terms carefully and make note of any exit clauses.
A side note to add is that in the past I have worked with clients who have been in a contract with another company. This does not stop you from being able to get second opinions or a free assessment from an R&D tax specialist. If the R&D tax specialist or accountant you have signed on to work for are failing to identify any claims to be filed, and you find out that you do in fact have expenses that are eligible, these can be grounds to terminate your contract. From a specialist perspective, R&D is subjective to some extent, and so getting more than one opinion will help guarantee you are getting the most out of what you pay.
Who will run the case?
It’s a good idea to ask how many people will be handling your claim and what their job roles are. Having the right people on the team will ensure a smooth filing process. Find out how your company’s information will be obtained, who will look through the information, who will write the report and file the claim, and the experience that these people have. You can then compare this with some other R&D tax specialists and decide which team is best for your company.
Any other doubts or questions
The R&D tax specialists handling your case should be dedicated to you and providing you the best service. This means sharing all their expertise and taking time to answer any questions you have at any time. Raise any doubts you may have and give them a chance to address these. If you’re interested in knowing more about how costs are identified, a report is written or filed, ask them. It’s a consulting service and so the company you hire should willingly offer you any information related to the scheme and your claim.