The importance of choosing the right R&D tax adviser
For accountants, choosing the right R&D tax partner is an important decision. As the awareness of this tax incentive continues to grow, many different types of advisers are becoming available to choose from.
It is important to explore your options before appointing the adviser you want to work with. Choosing the correct partner will not only benefit you as the accountant, but also add value to your clients.
As the accountant, you want to find out the R&D tax consultancy’s process of handling the claim, how much time you will need to invest, the terms of engagement and how the relationship will work between you, the tax partner and your client.
What to consider when choosing the right R&D tax adviser?
Adviser’s process
It is important to understand the process the R&D tax provider will undertake to gather the technical details of your client, prepare the claim and submit the claim.
Some advisers put the responsibility of writing the R&D report on the client, whilst others write the technical narrative themselves. Some advisers amend previously submitted CT600s, whilst others provide the accountants with the R&D numbers to include in the CT600.
Without understanding their process, you will not be able to justify whether their services are needed by yourself and your clients.
Be aware of advisers who exclude you from the claims process. The responsibility lies with you, your client and the adviser. Check the terms and conditions as some advisers put in sneaky clauses to stay away from blame if things go wrong.
Your time
You should consider the amount of time you will have to invest in a typical R&D tax claim. This may include:
- introducing your client and the R&D tax partner
- providing financial details such as payroll information and accounts, CT600s and tax computations to the R&D tax partner
- Amending the CT600 and tax computation to include the R&D figures
Different R&D tax advisers will offer very different services.
Enquiries
R&D tax relief is generous and as a result of this, there are many companies that provide this service. As the average HMRC enquiry rate is between 1% to 2%, many companies have jumped on the bandwagon to provide R&D tax services but lack the necessary skills.
In 2021, we expect the enquiry rate to substantially increase as HMRC has hired many more officers to help review R&D tax claims.
When a claim is submitted, HMRC reviews the claim for risks or weaknesses. If HMRC identifies an issue, they will not hesitate to open an enquiry.
When identifying a potential R&D tax partner, always ask what their enquiry rate is rather than their success rate.
It is also worth asking whether their service includes enquiry protection.
Terms and conditions
It is important for the accountant to look at both their own contract with the R&D tax partner and the contract that will be issued to their clients.
Be aware there can be a difference between the headline fee.
Some advisers will disclose a fee on the total qualifying expenditure costs. Other advisers will disclose a fee on the total value of the claim.
These costs are very different.
Examples
- Total qualifying expenditure
Let's say an advisor charges a 10% fee.
The R&D partner identifies costs of £100,000. The client receives a tax benefit of £24,700.
The R&D tax partner charges the client £10,000 (10% of £10,000) leaving your client with £14,700.
- Total value of the claim
's say an advisor charges a 25% fee.
The R&D partner identifies costs of £100,000. The client receives a tax benefit of £24,700.
The R&D tax partner charges the client £6,175 (25% of £24,700) leaving your client with £18,525.
Although option 1 looks better, when you actually crunch the numbers, option 2 is clearly more beneficial for your client.
Always check the contract for additional fees such as administration costs.
Another red flag is long term contracts. If the adviser wants to tie you or your client in a long-term contract, think to yourself “why?”.
An adviser should not have to tie you or your client in long term contracts.
Relationships
The relationship between you, your clients and the R&D tax adviser is fundamental to the R&D tax process.
It is important you think about whether you will get along with the adviser as well as being able to work alongside them.
Ask your potential R&D tax partner to introduce you to their existing partners and clients so you can do your own research.
Summary
Choosing the right partner should feel like a weight has been lifted off your shoulders. There is a lot to consider when choosing an R&D tax partner but it is a very important decision.
The right adviser not only benefits you, but also adds value to your service that you provide to your clients, which may result in them saving tens or hundreds of thousands of pounds.
