R&D tax – it isn’t rocket science

March 5, 2020

Uptake of research and development (R&D) funding that North East businesses can claim through the tax system has been surprisingly low since it was introduced. Tax specialist Simon Briton, who founded Quantify R&D and Quantify.tax, has been helping local companies boost their innovation by millions of pounds over the last 15 years. Here are his top five tips to make the most of R&D claims

1. Claiming R&D tax relief shouldn’t be a momentous event or a windfall. Plan for it and understand what it means to your funding. It is always easier to record evidence while it is fresh in your mind, rather than months later when accounts are put together.

2. Avoid ‘success fees’ and assumptions. If you’re paying a percentage of your claim to an adviser on a no-win, no-fee basis, you’re missing out on that part of your claim. If you move on to a fixed fee provider, you keep more of your claim. This is the easiest way to get more out of your claim and, importantly, keeps you away from sales people tempted to inflate your claims for the sake of a bigger fee. It just isn’t good enough to make claims based on guesswork, like 50 per cent of John’s time, 25 per cent of Jane’s time. Quantify.tax offers R&D claims from £40 a month. If you’re paying 15 per cent of your claim to an adviser for a claim worth £50,000 (the national average), you’d be £7000 better off. If they’re making it up, what are you paying for?

3. Understand what R&D means in your industry. For a lot of people, tackling uncertainties is just part of the job – but if you’re making product or process improvements in a way that isn’t obvious, you could make an R&D claim to unlock extra value from that part of your business. R&D doesn’t have to be rocket science, but equally, there are a lot of people pushing claims that know nothing about digital, manufacturing, construction, etc. Don’t get misled into making inflated claims to feather the nests of people selling R&D claims.

4. What is it that you’re not getting paid for? A lot of businesses have to do ‘risk work’, or proof of concept samples, developing ideas to try to win work. Until you get a contract to carry out that work, that time is something you can potentially claim for, if it involves enough challenge. You can claim whether you win the work or not, so it is important to have a system to record the work involved either way. This is often overlooked when claims are put together months after the event.

5. Build a culture that values innovation. Innovation often involves failure and a lot of business cultures don’t encourage discussion of failure or uncertainty. Recognise that you’re not going to move the business into a better position by doing what everyone else does, and some of the new stuff will be hard. You’ll get it wrong sometimes. That’s what this innovation incentive funding is there to support – to allow you to take risks you might not otherwise take.

Quantify.tax
If you’d like to know more about how Quantify can help your business manage your R&D claims, speak to Simon at simon@quantify.tax
www.quantify.tax
Photo © Design Network North/BurnsRowatt

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