The Very Real Cost of DIY R&D Claims
If I’ve caught your eye with this, I’m going to guess you’re either the business owner, or you’re the lucky person tasked to compile your R&D Tax claim; FD perhaps?
Thought so. You lucky devil. No doubt you’re already experiencing the very real cost of doing R&D yourself….the lack of time, and additional responsibility. Ever considered the cost of that?
Here’s 4 very real costs of doing R&D yourself:
1. Cost of your time
Think about why you were hired. Was it to be an R&D Tax Specialist? Probably not. You’re an expert in your field, as I am in mine. Taking on a project like an R&D Tax Claim requires time; time researching a complex tax system to determine the savings your business can make.
Logic suggests that if you bring something in-house, you’ll save money on the fees to outsource – correct. But it’s a false economy. Let me explain.
Case study: As an FD, with such a high impact role, falling behind on your work can ultimately slow down the productivity of your business. You have an FD. Through changes implemented and processes introduced, she/he makes the business £500k. Any time taken from the FD’s area of expertise will ultimately have a negative impact on the revenue of the business.
Makes sense when you look at it like that.
An FD of a software business once fed back to me: “The main benefit was how quick the process was and the auto feed into Xero – in other words it saved me and the team valuable time pulling the claim together.”
2. Cost of underclaiming….or over
You can’t be expected to be an expert in finance, and an expert in tax. 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.
For example, you’re probably aware, you cannot include rent in your R&D claim. However, if you are renting a property with bundled power and utilities, did you know HMRC accept claims of 10% of the total rent?
Knowing the boundaries of R&D is critical to ensure you are maximising your claim, this is true for subsequent years also; one year is never the same as the next, what might qualify one year, might not the following – overclaiming could mean a potential HMRC enquiry.
Case study: 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.
In another scenario, a client building a prototype for a heating system, had two employees – paid £100K in total – completing preparatory work for a month; we identified an extra £2.5K on top of the claim. Every little counts.
3. Cost of mind freedom….stress
Responsibility for making an R&D claim can carry a lot of stress. Although it’s not a direct cost, the cost of stress is very real. Unless your area of expertise is R&D, it is very difficult for you to have peace of mind that your R&D claim is 100% accurate.
Case study: We helped a client who had an enquiry as they had put the claim in themselves & they didn’t know how to answer some of the queries, we assisted in resolving that without reducing the size of the claim but it took nearly 6 months to sort.
With HMRC’s approach to procedures and policies constantly changing, coupled with a risk of under/overclaiming, it’s a heavy burden to shoulder.
4. Cost of expertise
The biggest challenge and risk of all, is down to having the right expertise. Your R&D claim will require you to draft up and understand a technical specification of the project carried to justify the claim. If you have a technical person capable of producing this content in the right format, then great! If you don’t, then it falls to the FD to step into that pseudo technical role, which is likely to be outside their expertise.
This is the primary reason FD’s pass claims our way, – it simply falls outside the scope of their expertise.
Cost of time. Cost of under/over claiming. Cost of stress. Cost of expertise.
It’s all at a cost.
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