Tax planning for your business is an essential task – but it can also be incredibly confusing. There are so many different niche areas within tax and the way Companies House handles it all, not to mention all of the benefits, reliefs and breaks that exist for certain industries or activities. But knowing what you can claim could help your business immensely, so it is always worth investigating. For example, many businesses are unaware that some of their activities could make them eligible for R&D tax credits, and so are not claiming that tax break (or in some cases cash) from HMRC. The best way for you to find out if you fall into this category is to hire an R&D tax consultant to help you. But how do you know if you are employing the right one?
Understanding R&D tax credits
R&D tax credits are just one form of tax credit given by the government as a form of incentive to businesses. This particular one is designed to encourage businesses to invest in innovation and propel their respective industries forward. Any company that is spending money developing new products, processes, or services, or enhancing ones that already exist, is deemed eligible for R&D tax relief. There is no cap on industry or specific activity, the key is to be developing and innovating something. If you are eligible, then you can claim either a Corporation Tax reduction or a cash payment from HMRC, which can do wonders for your cash flow if you are investing. But the process can be a bit complex and time-consuming, which is why most businesses hire an R&D tax consultant to handle it for them.
What makes a good R&D tax consultant?
If you are new to the world of R&D tax credits, the whole process can be a bit daunting. But with a good tax consultant on your side, claiming your tax relief can be easy and pain-free. All you need to do is make sure you hire the right R&D tax consultant for you. That can be easier said than done, so here are 4 things you should ask about when deciding on your consultant:
Client profile: As we mentioned earlier, R&D tax credits is a pretty broad area, and while a lot of the core processes are the same, many things can differ from industry to industry. So, you want to know that the consultant you choose has experience and knowledge of R&D tax credits in a range of industries to get the best service.
R&D tax credit experience: It goes without saying that you do not want to hire just any old consultant. You need someone with experience and knowledge of the R&D tax credit world, the processes, loopholes and rules, so that they can help you make the best decision for your business and not miss something important along the way. Do make sure you ask about their experience, how many clients they have done this for, how long they have been doing it, and what qualifications they have. You’re getting a great bargain when a company has several tax specialists that collaborate on projects.
Time investment: Find out how much time your consultant will be investing in your business and your claim. This can often be a good indicator of how much time you will be expected to give in return and can help you decide if that is a suitable fit. For example, some consultants will ask you to fill out lengthy forms and templates at the beginning and then regularly throughout the service, which means their time investment (and often their bill) is low and yours is high. This can work for some people, but it is not the ideal method. Instead, you want a specialist who is going to spend time understanding your business, preparing detailed reports to support your claim, making sure you understand them and then handling the submission process for you or in partnership with your accountant.
Clear processes: A good tax consultant will be able to tell you exactly what they will be doing for and on behalf of your business, step by step. Knowing and understanding what this looks like is critical for you, as you are still taking on the risk of the claim even if you are not the one filing it. While there will always be slight differences from company to company, a comprehensive R&D tax service should ideally look something like this:
- Discovery & assessment
- Information gathering & analysis
- Preparation of claim documents
- Review and approvals
- Submission of your claim
At Purple Lime, we are experienced in a wide range of tax planning, including helping you with your R&D tax claims and working out what you can and can’t claim for. We can also offer advice on the best way to utilise R&D tax credits, and if you are missing out on something you could be claiming. If you want to know more, please just get in touch by emailing firstname.lastname@example.org or calling us on 01249 691360.