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The top three R&D tax challenges facing accountancy firms

Author: Tom Mason

R&D tax is something of an enigma for many business owners, which is why they turn to you for support – but you may be equally in the dark.

Tax relief on R&D expenditure is one of the most complex areas of UK tax legislation because of its scope, definitions and submission requirements.

Accountancy practices that can offer this service are sought-after by innovative clients, but many firms are being put off advising on R&D tax due to this complexity.

We’re here to highlight the major issues facing firms advising on R&D tax – and how we can help you address them!

Defining the parameters

This is an issue facing many of our clients, whether accountancy firms or business owners. Quite simply, qualifying R&D can be hard to define.

You’ll likely know that successful R&D claims will:

  • Seek an advancement in the field of science and/or technology
  • Seek to overcome or address an uncertainty in that field
  • Relate to the primary trade of the business making the claim
  • Claim for relevant expenditure, such as staff or trial costs

However, in practice, the first point in particular is not so easy to define.

Science and technology exist in the majority of sectors, whether the primary focus of that industry or not. For example, the fashion industry may develop new, artificial materials, although that is not its primary function.

Firms advising businesses on these ‘fringe’ projects may face concerns over whether claims will be deemed compliant with sector regulations.

Many of our consultancy team are sector specialists, meaning they can dedicate their expertise to your clients whose claims aren’t completely clear.

Submission requirements

Non-compliance with the scheme led to the Government introducing enhanced submission requirements, including the Additional Information Form (AIF) and advance notification.

The majority of accountants are now aware of advance notification, but the AIF is a different ballgame.

It requires a detailed technical narrative and a breakdown of qualifying expenditure alongside the claim. This may seem simple, but HM Revenue & Customs (HMRC) will be looking for specific details which indicate that your claim is compliant and relevant to the wider R&D landscape in the UK.

With over a decade of experience in the field, we understand how to craft narratives and claims in order to build a successful claim – and we’re here to help you do the same.

HMRC enquiries

Here we are, the dreaded ‘E’ word. Enquiries from HMRC have risen upwards of twenty-fold since 2021/22, to around 20 per cent of all claims.

Navigating these enquiries on behalf of your clients can be a challenge, as it involves demonstrating that your client’s work qualifies for R&D tax relief.

This is typically done by backing up the technical narrative with evidence of expenditure and the scientific/technical value of the project – emphasising the importance of working with an R&D tax specialist and a competent professional.

Avoiding enquiries isn’t always possible, but the best way to do so is to work with a specialist in R&D tax and prepare a fully compliant, detailed claim.

If these challenges are affecting your firm and you want to make a change, contact a member of our consultancy team today to discuss your requirements.