What does an R&D consultancy firm actually do? 

An R&D consultancy firm should first ensure that the projects undertaken by a company meet the criteria for an R&D claim and then, if engaged, should assist in preparing claim documentation which justifies the claim to HMRC.

There are also a number of other activities that an R&D consultancy firm should undertake including :

• • Assessment of the company and its linked/partner enterprises to ensure that any claim is submitted under the correct R&D scheme.
  • Assessment of the company’s costs in relation to R&D activity and other relevant information such as grants received.
  • Submission of the claim, either directly or via an existing accountant.
  • Post submission follow up to ensure that any funds due are received from HMRC.
  • HMRC enquiry support should that be necessary.

How much does it cost to prepare & submit a claim for R&D tax relief?

This depends on who is helping you and what their service includes.  It may be a flat fee or it may be a percentage of the benefit generated by the claim.

Most R&D consultants charge based on a percentage of the benefit that the company receives from its R&D claim, with fees ranging from 5-50%.  However,  whilst a low percentage may seem attractive, it’s not quite that simple as we explained in our recent blog here.

Flat fees can be a good option for companies who want to ensure that they aren’t charged excessive fees, however it’s important to ensure that they include any enquiry work if necessary, as we have seen cases where they don’t and this can lead to the company being charged much more should HMRC open an enquiry.

At R&D Consulting we take more of hybrid approach, with some of our clients on fixed fees and some where our fee is based on a percentage of the benefit of the claim.  We are also happy with the latter to put a fee cap in place to ensure our clients don’t end up with excessive fees.

What are the risks of submitting an R&D claim?

Once an R&D claim is submitted, HMRC may open up an enquiry and ask for further details to support the claim. It will then either approve the claim as is, reduce the claim amount or reject the claim. In the case of the latter two scenarios, HMRC may also choose to issue a fine of up to 100% of the claim value. This is why it is extremely important to undergo a robust procedure for compiling a claim.

What records do I need to submit an R&D claim?

Technically, no records are required when submitting an R&D claim, but it is best to try and implement some kind of record keeping procedure.

How is an R&D claim submitted?

An R&D claim is submitted as part of a company’s Corporation Tax return. Submitting a claim is very simple, but the process of compiling the claim must be robust to ensure that the claim is defendable against an HMRC enquiry should that be necessary. HMRC has the capacity to issue hefty fines for R&D claims that have not been compiled with due care.

There is a 2-year time limit from the end of an accounting period in which to submit an R&D claim. If a company’s Corporation Tax return is submitted without an R&D claim, an amended version may be submitted to include an R&D claim at any time during this 2-year period.

How long before I receive my payment?

Any refunds or credits resulting from an R&D claim are usually received within 6-8 weeks from submission, but this time can lengthen at certain times of the year. HMRC may also choose to offset any refunds/credits against monies owed in the form of VAT or PAYE for example.

How often can I make an R&D claim?

An R&D claim can be made for any accounting period which contains qualifying costs relating to qualifying activities, as long as the claim is made within 2 years of the end of the accounting period.

Is R&D Tax Relief a grant?

No, but certain grant funding can have an impact on an R&D claim so it is important to be aware of this.

If you have any questions on this blog or anything R&D related, please contact us at [email protected].

Posted: 28 Feb 2022