Over the last 3 years, the UK has experienced an emergence of R&D tax platforms. These platforms are designed to reduce consultancy fees whilst maintaining a level of security, all with specialists and R&D tax consultants reviewing the technical report and costs.
Additionally, the R&D platforms currently on the market allow accountants to automate significant parts of their process, making R&D tax more accessible to their client base. However, with 50% of existing claims falling under a £30,000 benefit, the utility of these platforms may be limited in that they prioritise the simplification of reporting. This primary focus may exclude clients from maximising their financial returns.
While automation of this calibre can provide significant value, large parts of the necessary project qualification and technical writing then falls upon client shoulders. While the integrated user experience allows for information reporting immediacy, it neglects to account for increasing HMRC scrutiny around R&D tax, potentially pausing SME payments as a result. By outsourcing technical writing to R&D tax consultants who specialise in HMRC policy, it is possible to ensure maximum returns while simultaneously accounting for shifts in policy.
When it comes to the suite of services offered by R&D tax providers, one primary element of ensuring funding is to properly filter out non-qualifying projects. When accounting for the accuracy of R&D tax platforms, filing entities must evaluate the aptitude of these platforms to act as sufficient filtering systems. Diligence in filing is essential, but diligence in determining project eligibility is a foundational aspect of R&D success. The graphic below is designed to show impact to claim size when filtering with platforms.
While systematically integrating technology and automated programs into R&D tax processes is an inevitability of industry progress, we must ensure that the bulk of workload is not then forced onto the client as a result of necessitating in-house data input. With consistent changes to HMRC policy, ensuring the continued use of consultancy is important when evaluating the value of reports, project success, and secured funding potential.
Time sheeting has three primary advantages in regards to claiming R&D. The first is security. HMRC, in their 2020 tribunal win against Hadee Engineering, cited that timesheet data is the ‘gold standard’ for calculating R&D percentages of staff.
This level of security goes further when the timesheet data is broken down into clearly identifiable stages within the course of a project. This then means that percentages of R&D time sheeting can be allocated as stage-dependant. For example, in a R&D project, you can typically break down the stages.
With this level of detail, you can more accurately calculate R&D at each individual stage. This data contribution provides maximised levels of security in calculating staff costs. Should an enquiry be raised by HMRC, this methodology will stand up to any inspector.
Having data readily available at each of these stages allow claims to be safely increased. Many companies neglect to track data throughout the concept stage, resulting in excluded time.
Claimants often qualify their projects at the end of the year or as their projects occur. By utilising timesheet software, claimants may be able to quickly identify projects for further discussion.
This practice removes manual excel exercises, and in some instances, meetings with providers to discuss the boundaries of R&D tax. As a result, timesheets can increase claim size, increase security, and save time.
This element of R&D, claim progress reporting, is the one area where R&D platforms have a jump on the more traditional specialists. While the client shouldn’t be qualifying projects or conducting technical writings, a shared portal where the client can see the technical report as it is created is a time-saver that avoids trite back-and-forth occurances via email.
The real value in claim progress reporting is the element of control, coupled with the ability to forecast elements of the claim. Claim progress reporting can quickly identify blockers to information gathering.
It can also allow a common portal for provider and claimant to see the claim evolve, allowing the claimant to forecast claim size. Better foresight on claim size can allow for multiple benefits:
– Delay in fundraising
– Less dilution of shares
– Speed-up in hiring
– Ability to participate in debt financing
– Facilitation of investment into CAPEX
With the introduction of the new merged R&D scheme, the ability to demonstrate who ‘owns’ the R&D has become more important. One method is to track all pre-contractual client conversations and consolidate the contract in one place. Because HMRC continuously increases the necessary tracking components, policy literacy is an ever-moving landscape. This is software can help by having a single location to upload data solely for R&D tax purposes. By proxy, this can create a place for the client and advisor to ensure required documents are easily accessible. This can be achieved through internal systems, but the limitation continues to be advisor access.
In summary, software should be utilised in R&D tax claims not to remove the human element of consultancy, but to increase immediacy in which clients can check the progress, existing data, and expediency of their claim. With the changes happening with HMRC legislation that require more structural consultancy, software should serve as support of the human element necessary for R&D filing.
