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FIND R&D SAVE CLIENTS

Find R&D. Save Clients.

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Right now, the government is throwing a lot of money at business owners. Money to help them survive these incredibly difficult times. But in most cases, all this money will eventually need to be paid back. It’s hard to estimate just how long it’s going to take for businesses to get their hands on these critical funds.

But as their advisors, there are other options for you to share with your clients, and one that is massively underused by so many businesses: that’s R&D Tax Relief.

You’ve no doubt investigated this relief previously, but business activities can and do change…..a lot. R&D could be a very real lifeline for some clients right now, to get money back into their business. If you can find R&D Tax Relief for a client, you could save their business.

And, even for those clients who already claim, there are steps that could mean more funds are identified, or advanced funding brought in.

For your clients, this is far better than loans hanging over their heads. It’s just money that belongs to them anyway.

We understand that without a specialist hat on, R&D Tax Relief can be time consuming to navigate. It can also be all too easy to rule a client out. It’s not that black and white though. Businesses across any industry can absolutely be eligible to make a claim, you’ve just got to know what to look for.

So, we’ve done something to help.

To give you autonomy to identify clients who might be eligible, we’ve split the it into two steps:

STEP 1 – The Business Activities

You know your clients and their business activities, so it makes sense for you to determine what they are doing and whether they meet the foundation criteria.

View infographic: Are your clients eligible for R&D Tax Relief?


STEP 2 – Science & Technology

Then, in a 15-minute call with us & the client, we’ll determine: whether the business activities fall into science & technology (this is the bit that can be difficult to determine), what exactly qualifies and what doesn’t within the claim, and, the size of the claim.

 

To get you started, we’ve created a toolkit of resources to use with your clients to help reach out about R&D Tax Relief and determine if they are eligible.

At the moment this toolkit is reserved for Radish and Diagnostax customers but do drop us an email at marketing@radish.tax if you’re interested in downloading the toolkit.

INFOGRAPHIC_ Are your clients eligible for R&D Tax Relief

Infographic: Are your clients eligible for R&D?

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To help identify clients who might be eligible for R&D Tax Relief, we’ve created this handy infographic diagram and separated it, into two steps.

STEP 1 – The Infographic

You know your clients and their business activities, so it makes sense for you to determine what they are doing and whether they meet the foundation criteria.

STEP 2 – Science & Technology

In a 15-minute call with us & the client, we’ll determine: whether the business activities fall into science & technology (this is the bit that can be difficult to determine), what exactly qualifies and what doesn’t within the claim, and, the size of the claim.

It’s that straightforward.

Infographic - is your client eligible for R&D

We’ve also created a toolkit of resources to use with your clients to help reach out about R&D Tax Relief and determine if they are eligible.

At the moment this toolkit is reserved for Radish and Diagnostax customers only but do drop us an email at marketing@radish.tax if you’re interested in downloading the toolkit.

4 Ways R&D Could Save Your Business - no title

5 Ways R&D Could Save Your Clients Business

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5 WAYS R&D TAX RELIEF CAN GET MONEY BACK INTO YOUR BUSINESS


R&D is a massively underutilised tax relief that many businesses could be benefitting from right now. We’re talking up to 33% of the costs incurred on activities that are considered eligible and this money can be used for any purpose. Money that is needed by businesses right now.

But, not only that, there are potential options for those businesses already making claims, to identify more funds.


1. R&D Tax Relief for a business with no previous claims

An SME company that qualifies for R&D Tax Credits can receive an extra deduction of 130% of qualifying costs against their taxable profits. This is in addition to the 100% revenue deduction already given. For loss-making companies, the loss can be given up (so can’t be used in future) for an immediate tax credit equating to a maximum of 33.4% of the qualifying costs. Claims can be made up to 2 years AFTER the end of the accounting year in which you incurred the costs. This means you can claim for costs that were incurred up to 3 years ago.

Example:
A company with an April year-end incurs R&D costs of £100k per year and has been loss-making as they are currently in the development phase with their product.

They can make an immediate R&D claim for their April 2018 and April 2019 periods. They have already deducted £100k of costs from their annual revenue but can also deduct another £130k per year due to R&D tax credits (130% of £100k). In total, the £100k spent allows them to deduct £230k from revenue.

If losses are large enough, they will receive a tax credit of nearly £67k (£100k x 2 years x 230% x 14.5%). This will be received by the company as tax-free cash.


2. R&D tax relief where a business has built up losses

Some companies have made R&D claims in the last 2 years and decided to carry forward losses made into the future – as it will save them corporation tax in the future. They should consider amending their tax returns now to change the carried forward loss to a tax credit.

Example:
A company has made R&D claims for the last 2 years which has built up an “R&D loss” of £500k. Due to their projected product launch and projected profits from commercialising, they had decided to carry this forward to get future corporation tax relief of £95,000.

Instead, they can file amended tax returns and claim immediate cashflow of £72,500.

3. Maximising previously claimed R&D tax relief

It is worth reviewing all previous R&D tax relief claims to ensure the claims were maximised. If they have not been maximised, amended returns can be submitted to claim additional tax relief.

Example:
The company has not claimed for all materials, heat and light costs, smaller subcontractors, support staff e.g. HR, admin, finance.

The total of all these costs come to £15k a year.

If they resubmit the R&D claim with these costs included, it could give a further £10k tax refund immediately (£15k x 2 years x 33%)


4. Obtaining advance funding for R&D tax relief

Advance funding may also be available for a claim in the current year.

Example:
A company has been making R&D claims for the last 3 years and gets £25k a year back from HMRC.

They have a June year-end, but their accounts and tax usually take 10 months to finalise. Advance funding is available in April 2020 for the June 2020 year-end, which would otherwise only have been received in June 2020. This effectively brings the cashflow forward by 15 months, with only the financing cost to the client.


5. Shorten year-end to accelerate tax credit

For a loss-making company, shortening the year-end so that an R&D claim can be submitted sooner is worth considering.

Example:

A company with a June year-end has R&D costs of £100k and total losses of £100k up to 31 March 2020. They anticipate a much-reduced R&D spend up to June.

They decide to shorted the year-end (9 months to 31 March 2020) which allows them to submit an R&D tax credit claim of £33,350 to HMRC 3 months sooner than otherwise would have been the case.


So, we’ve created a toolkit of resources to use with your clients to help reach out about R&D Tax Relief and determine if they are eligible. At the moment this toolkit is reserved for Radish and Diagnostax customers but do drop us an email at marketing@radish.tax if you’re interested in downloading the toolkit.


Do you have clients like this?

Help save their business. Use this link to book in a call and we’ll discuss the relevant options for your clients. 

 

Steve Carell cringing

R&D: 9 Common Mistakes of Accountants

I’ve worked with loads of businesses from all kinds of industries; some have never made a claim, others have used a specialist (but the process was incredibly time consuming) and those where we work together with their accountant.

However, the partnership we have with accountants is great. The accountant already has the insight and understanding of the business, to identify an opportunity to claim and we have the experience to ensure that the claim is maximised to its fullest.

But I’ve also witnessed a few horror stories where an accountant should have used a specialist.

Here’s some of the things I have seen:

1) CLAIMING EXPENSES

 We took on a client who had spent £15k on travel to meet sub-contractors; paid for on a company card – if the travel has been paid on a personal card, they would have been able to claim nearly £4k back.

2) ACTING AS A SUBCONTRACTOR

 A large company was building a web application in-house and subcontracted part of the build to a third party. This third party could have claimed an extra £5K from under the RDEC scheme.

3) DOING WORK FOR A CUSTOMER

 We took on a Digital agency who were delivering a lot of R&D work for third parties; they assumed that because the work was for another company it didn’t qualify – we were able to identify two areas giving them a tax saving of £40K.

4) SALARY VS. DIVIDENDS

 A Director we worked with was taking a small salary of £10K but dividends of £200K. However, 80% of their time spent was on R&D. We worked with him to ensure that the net he was taking from the company stayed at £148K, whilst the company made an additional saving of £17K.

 

5) RENT

 A pharmaceuticals company we worked with paid £30k/year for a utility and rent package; looking back over 2 years we secured them an additional £2K.

 

6) NON-TECHNICAL SUPPORT STAFF

 A company had 30 employees, of which 3 employees had supporting roles – salaries totalling £80K – they should have been claiming an additional £20K. That’s significant money back into the business.

 

7) EXCLUDING THE PLANNING STAGE

 A client building a prototype for a heating system, had two employees (paid £100K in total) completing preparatory work for a month – through this, we identified an extra £2.5K on top of the claim. Every little counts.

 

8) INCLUDING ROUTINE DESIGN & MARKETING

 We saw a client had been claiming for A LOT of marketing & routine design costs – error – which meant they had been overclaiming by approximately £5K!

 

9) THE COPY & PASTE

We had a case where an accountant had used a copy & paste fashion, with very little detail, as a result the additional cost claimed was around £50K! This put the client in unnecessary risk for an HMRC enquiry.

Interested in speaking?

Use this link to book in a 15-minute scoping call with one of our consultants.

If you qualify, you can then book in to complete the rest of the information online in a 45-minute consultation. One hour of your time, that’s all. 😊

Rule in rule out

It’s simple…rule it in, or rule it out.

Guest blog: James Middleton, Elevate Advice

But we can’t claim for R&D?

Sound familiar? It’s something I hear way too often from new clients, but around 50% of the time it’s not true. When a client tells me their previous accountant ruled them out, or that they don’t think they qualify, I don’t take it as fact. Business activities continuously change, and it can be very easily missed if you don’t know what you are looking for.

Rule it in, rule it out

We have a rule at Elevate Advice, and it is a simple one: since partnering with Radish, I have taken every single client through the R&D Tax Relief eligibility process, so that I can with confidence rule them in, or rule them out. I can now with confidence say I have R & D covered for all my clients and I have an awareness for those that will have it in the future.

50% ruled in

Through this process with Radish, I have found around 50% of our clients are eligible for R&D Tax Relief, which is great for the clients, securing cash to invest back into their businesses to help them succeed.

It’s about trust

It’s our duty as advisors to fully understand our clients and deliver them a quality service to meet their needs. Through partnering with Radish, I can say with confidence with confidence that I have R&D covered for all my clients and I have my clients trust to select and work with the best.


Working with Radish

My experience working with Radish was great. Tim is very different to other tax professionals, for Tim it’s not about quoting section numbers and showing off what you know – as nobody cares about this. He is approachable and makes it simple for the client to understand. He asks questions first, to help him explain it better to the client – absolutely no professional arrogance.

If you want 100% confidence you have R&D covered for all your clients, get in touch with Radish and they’ll quickly be able to determine which of your clients may be eligible to make a claim.

ACCOUNTANTS RD TAX SPECIALISTS

Accountants ≠ R&D Specialists

Since the virtual doors opened at Radish, I’ve worked with loads of businesses from all kinds of industries; some have never made a claim, others have used a specialist (but the process was incredibly time consuming) and those where we work together with their accountant.

The partnership with accountants is great. The accountant already has the insight and understanding of the business, to identify an opportunity to claim and we have the experience to ensure that the claim is maximised to it’s fullest….without overstepping the boundaries. Nobody wants an HMRC enquiry.

But I’ve also witnessed a few horror stories. If you’re not using a specialist in R&D, there’s a big risk you could be underclaiming…..or even worse overclaiming. My advice? If you’re accountant handles your R&D tax claim on your behalf, check out these questions with them.


HAVING THE RIGHT EXPERTISE

Accountants aren’t always tax experts. It’s worth finding out if your accountant is also a chartered tax adviser and most importantly whether they specialise in R&D to ensure your claim incorporates everything that qualifies.

ASK YOURSELF: Do I know if my accountant is a chartered tax adviser, specialising in R&D Tax?

ASK YOUR ACCOUNTANT: Do you work with an R&D specialist to prepare our claim?


KNOWING WHAT CONSITUTES AS R&D

Tying very closely to having the necessary expertise, knowing what constitutes as R&D is where I see mistakes time and time again. And it’s hardly surprising; tax is forever changing minefield. Unless you have your head in it every day, I really don’t understand how you can be aware of all the many nuances this relief holds.

I could really go to town, but I won’t, here’s just a few examples of things that I often see missed:

1) Claiming expenses

As an example, if you fly to the Far East to see a supplier any expenses related to that travel can be claimed back if they are paid for on a personal accountant…. the hotel, the food. However, if this is paid on a company credit card you can’t claim R&D. Amazing, right?

We took on a client who had spent £15k on travel to meet sub-contractors; paid for on a company card – if the travel has been paid on a personal card, they would have been able to claim nearly £4k back.

2) Acting as a subcontractor

If you are acting as a subcontractor, you might still be able to claim R&D. So, if you’re delivering part of an R&D project for a large company, you can still claim R&D as if you are a large company under the RDEC scheme. There, are so many variables at play here, so it’s critical to have your head in this – just knowing whether you are in the category of subcontractor, or large company!

A large company was building a web application in-house and subcontracted part of the build to a third party. This third party could have claimed an extra £5K from under the RDEC scheme.

3) Doing work for a customer

If you are delivering work for a customer, you might be able to claim R&D for the internal R&D you are doing. For example, if you are acting as a contractor for anyone, you may still be able to claim R&D for the time and costs your team spend increasing your own expertise.

We took on a Digital agency who were delivering a lot of R&D work for third parties; they assumed that because the work was for another company it didn’t qualify – we were able to identify two areas giving them a tax saving of £40K.

 

4) Salary vs. Dividends

As a business owner, if you are personally delivering a lot of technical work, you can claim R&D relief on your salary. However, you need to do the analysis to determine whether it is more beneficial to take a salary or dividends.

A Director we worked with was taking a small salary of £10K but dividends of £200K. However, 80% of their time spent was on R&D.
We worked with him to ensure that the net he was taking from the company stayed at £148K, whilst the company made an additional saving of £17K.

 

5) Rent

Now this one I see time and time again. You cannot include rent in your R&D claim. However, if you are renting a property with bundled power and utilities, HMRC accept claims of 10% of the total rent. Worth knowing!

A pharmaceuticals company we worked with paid £30k/year for a utility and rent package; looking back over 2 years we secured them an additional £2K.

6) Supporting Staff

If you employ staff who have a role in supporting those working directly on R&D for your business, a percentage of their time can be included; otherwise known as, ‘qualifying indirect R&D activities’.

A company had 30 employees, of which 3 employees had supporting roles – salaries totalling £80K – they should have been claiming an additional £20K. That’s significant money back into the business.

ASK YOURSELF: Has my accountant shared specific tips about changes I could make to maximise my R&D tax relief?

ASK YOUR ACCOUNTANT: Are there any ways I could maximise my R&D claim further?

 

KNOWING THE BOUNDARIES

Unless you specialise in R&D it isn’t always easy knowing exactly where to set the boundaries around an R&D claim; knowing when it starts and where it ends.

Where R&D starts

A common misconception is to exclude the time spent on the planning and design stage of a project, focusing purely on obvious costs like subcontractors. It’s critical to establish a system to record this stage – I’ve seen many cases where the ‘pre-work’ has been missed, resulting in under maximised claims.

A client building a prototype for a heating system, had two employees (paid £100K in total) completing preparatory work for a month – through this, we identified an extra £2.5K on top of the claim. Every little counts.

Where R&D ends

On the flip side, I’ve also witnessed costs being included in claims outside of the project scope, including aspects that don’t contribute towards the overcoming a challenge e.g. making finishing touches to a product or marketing.

We saw a client had been claiming for A LOT of marketing & routine design costs – error – which meant they had been overclaiming by approximately £5K!

ASK YOURSELF: Do I have a foundation understanding of the scope of our R&D claim?

ASK YOUR ACCOUNTANT: Can you give me an outline of what is included in our R&D claim?

 

REPEAT CLAIMS

The two most common approaches I have seen to repeat claims is (1) you are sent a complicated spreadsheet to complete, or (2) your accountant handles the repeat claim on your behalf.

There are problems here, (1) requiring a lot of your time and (2) leading to a risk of overclaiming (and an HMRC enquiry), or underclaiming. There will be changes. No two claims are the same year after year and you will need to provide new information. To be honest, I like to approach every new claim, like the first claim, which my clients appreciate as it only takes 1 hour of their time.

We had a case where an accountant had used a copy & paste fashion, with very little detail, as a result the additional cost claimed was around £50K! This put the client in unnecessary risk for an HMRC enquiry.

ASK YOURSELF: Does my accountant take time to speak to me about changes to my R&D claim?

ASK YOUR ACCOUNTANT: What do you need from me, to make our R&D claim next year?

 

HMRC CHANGES & STRATEGY

Changes to R&D Tax Relief are imminent in April 2020. Unless your accountant has their finger on the pulse of tax, this might not be something they are aware of. In a similar vein, HMRC deploy strategies throughout the year, focusing heavily on different aspects of the relief.

As a specialist, you need to be aware of what HMRC is doing to time your claim efficiently – the cash flow benefit could be significantly impacted by a huge delay, especially around March when the majority of claims are made.

For example, if you put a claim in to HMRC in Feb, you’d get it back in 5 weeks; put the claim in later….say April, you might see you money for up to 5 months – that’s significant for cash flow.

ASK YOURSELF: Have I been notified about the proposed changes coming in April 2020?

ASK YOUR ACCOUNTANT: What are the proposed changes to R&D relief due to come in this April & how will they affect our claim?


MAXIMISING THE CLAIM

There is more than one option you can opt to receive the benefit for your R&D claim. Without the experience, it isn’t always obvious which route it best to take – in some cases your Accountant might not even be aware there are different options that should be considered for your business.

For example, in some circumstances, it can be more beneficial to the business to carry back the loss, instead of claiming the tax credit. 

ASK YOURSELF: Has more the one option been suggested to me, for the benefit of my R&D claim? 

ASK YOUR ACCOUNTANT: What are the different options for receiving my R&D claim benefit?

Ultimately, you want to make sure you are fully maximising this generous tax relief, as well as not overclaiming – stuff changes all the time, so it’s fair to ask your accountant these questions.