Core to this question is balancing the cost of making a claim vs the benefit your business receives in tax relief. Of course, this depends both on the amount of R&D qualifying expenditure on one side against the cost to the business of time, resources, and specialist advice in making a claim.
Establishing cost vs benefit upfront
Here at GovGrant, the first step in the process is to identify qualifying R&D projects, and the eligible expenditure associated with them, to establish the value of the claim. This is just an estimate based on the facts shared and discovered in an initial call or meeting. This is why a claim can initially look high value but then in reality may fall on the wrong side of this cost vs benefit equation.
Even if initial indications are good, sometimes there just is not enough value in the current claim for it to be sensible to use a specialist firm like GovGrant to deliver that claim.
Have you overestimated your R&D spend?
Businesses may overestimate how much of their cost is linked to R&D, you might call it an activity R&D internally but it might not meet HMRC’s guidance. With new product development, for example, the new product itself might not necessarily be innovative so to establish whether R&D had taken place we would focus on the steps taken to achieve the new product, successes, and failures. This is where the qualifying activity could lie.
Other times businesses might have been led to believe that they had qualifying expenditure by other R&D providers. Not all providers offer the same level of diligence in the claim process. This means that previous claims could fall short of our expectation and belief of what is qualifying R&D. As a result we could need to explain that currently there is less qualifying expenditure than you thought, and perhaps you have been claiming R&D credits incorrectly in the past.
This is something that is even more important now that HMRC are taking a more proactive approach to investigate fraudulent or inaccurate claims. Find out more about selecting your R&D tax credit adviser here.
Are there more cost-effective ways to claim?
Our GovGrant costs include the onboarding process of getting to know your business, technical delivery, financial review, quality assurance processes, and submission. We offer a premium service, with a wide range of consultative R&D and IP services to meet the needs of the most complex clients. This could mean that for some smaller claims our processes wouldn’t be cost-effective in every case.
To make sure that businesses benefit from smaller claims, we created Elevation for our Accounting Partners. This service includes an R&D builder for small claims by taking the accountant through a simple process based on our experience, knowledge and benchmarked against our data.
This makes sense as your accountant already understands business and the intent of HMRC tax incentives. If you are an accountant with clients who could be in a position to claim R&D tax relief then we can help you sort out who could be eligible, who could be managed through Elevation, and who needs the more specialist advice that GovGrant can offer.
Of course, no matter who advises you on your R&D tax claim it still involves your time and resource which in smaller operations can be one of the most valuable commodities to you. In which case you may want a realistic appraisal of whether it’s worth claiming now, or waiting until you are in a position to make a larger claim.