Your client’s company made a profit in this financial year. Naturally, they are thrilled. However, they spent a great deal on R&D, and the resultant R&D Tax Relief has reduced their corporation tax liability to the point that it looks like they have incurred a loss. While R&D tax credits do not create a true loss, merely a ‘loss’ on paper, if your client is trying to raise capital they may be afraid to claim R&D tax relief. That’s because investors may be more inclined to fund your business if it is showing a profit.
The good news is there are ways to secure funding and raise capital if your client finds themselves in this position.
How R&D tax credits can reduce profit in your accounts.
When businesses make a profit but also spend a lot on R&D work in a given financial year, R&D tax relief can create a loss position for the business. This can happen as a result of the enhancement mechanism present in the SME R&D tax credit scheme. The SME scheme lets companies deduct an extra 130% of their qualifying R&D costs from their yearly profits. It, therefore, has the potential to reduce your client’s corporation tax, thereby making it appear as though they have incurred a loss.
Why might your client care about appearing to be in loss?
There is a marked difference between profitability and profits. A business’s profitability is based largely on the nature of its cash flow in the long term. However, regardless of whether your client has a promising business outlook, profits on their financial statements look good when viewed by third parties. Additionally, profit margins are usually more important when these third parties are considering offering funding, such as grants or loans. One of the main ways businesses raise capital is through a funding round, where independent investors provide funding in exchange for equity in the business. Potential investors will look at various aspects of the business when deciding whether to invest; a solid business plan, a unique idea, an experienced management team, and profitability, to name a few.
Securing funding is often an important element of maintaining positive cash flow in a business. R&D tax credits can serve as a valuable consideration for improving cash flow, both in the short and long term. This is because the SME scheme also allows for companies to claim a cash credit by surrendering their losses. The cash benefit offered, which is 14.5% of the total losses surrendered, can be realised in the short term when compared to the Corporation Tax reduction of the scheme at large. The latter is felt at the end of the given financial year whereas the former aims to be delivered within 28 days of a claim.
Ultimately, it comes down to a choice between what the immediate need for the business is in that particular financial year – profits or cash flow. A steady flow of capital is essential to sustaining a business, but showing a profit may be key to securing capital funding in the future. What’s best for your client will depend on their situation, so consulting with an R&D tax credit specialist is advisable.
How to raise capital if R&D tax relief puts your client into a loss position
As mentioned, a funding round is a common way businesses go about raising capital. Even if your client is in a ‘loss position’, there are ways to instill confidence in potential investors and raise the capital they need.
Prepare a thorough business plan. It is important your client clearly demonstrates the need for raising capital and how they intend to spend it. This should include expenditure for at least three years, a detailed financial plan, and even an exit strategy focusing on repayment. Comprehensive record keeping will aid in this process, as well as demonstrate your client’s credibility.
Consider debt restructuring. Renegotiating the terms around existing debts can lead to an increase in capital. One tool for restructuring is a debt-for-equity swap, whereby creditors accept equity in exchange for a cancellation of all or part of the company’s debt. Similarly, a renegotiation may be made with bondholders for a ‘haircut’, resulting in interest payments or a portion of the debt being written off. Finally, your client may have callable bonds for use when they can’t make interest payments. They can redeem these early in times where interest rates are decreasing.
Create a crowdfunding campaign. Crowdfunding refers to raising small amounts of capital from a large pool of individuals. Often, investors who participate in crowdfunding campaigns are less scrupulous in their approach to investing than investors who take a more traditional approach. Furthermore, they may be more likely to make investment decisions based on emotions rather than pure fundamentals. As such, businesses that undertake R&D work that qualifies for tax credits may generate sufficient excitement such that the “paper loss”, as previously described, is less of a concern. Ultimately, connecting with a pool of investors could increase your client’s chance of raising capital.
Seek venture capital for the business. Venture capital comes from private investors and is usually given to startups that show promise of long-term growth. Being in a loss position can make it difficult to convince potential investors to invest in your business. However, because your client will not be experiencing an actual business loss, and as R&D often leads to future business improvements, seasoned investors such as Venture Capitalists are likely to identify that and invest based on the long term opportunity the business presents. Once again, a solid business plan, forecasting and growth, and an exit strategy are key to securing capital from this type of investor.
Maximise your client’s benefits with made.simplr
Companies looking to claim R&D tax credits can often benefit from expert advice and consultation. Our expertise, together with our all-in-one R&D tax credits software, is a simple and cost-effective way for accountants to secure the maximum benefit for their clients.
Since Brexit and the Covid-19 pandemic, companies across the UK have been offered increased business support through government grants. The Department for Business, Energy & Industrial Strategy has reported on the amount of funding allocated to SMEs through both the Small Business Grants Fund and the Retail, Hospitality and Leisure Business Grants Fund. From December 2020 to August 2021, close to 1 million businesses were eligible to receive funding from these grants, with more than £11bn being claimed across both funds when the schemes closed earlier this year.
The SME R&D tax relief scheme in the UK is classed as notified state aid, which is a form of government funding regulated by the European Commission. To prevent companies from claiming aid for the same project from multiple sources, the government has placed certain limitations and restrictions on how R&D tax credits interact with other grants.
As a result of the nature of these grants, and their recent prevalence, it is valuable for accountants to be aware of how they interact with R&D tax credits. For example, if your client is looking to expand and develop their business, they will likely be looking for multiple funding sources. They might have accepted grant funding without considering how it will affect their eligibility for receiving other financial benefits, such as R&D tax credits. The good news is that this does not necessarily disallow them from claiming R&D tax credits in the current year or in the future.
The effect of notified state aid
State aid is defined as an advantage that is selectively given by public authorities using state resources. While these ‘advantages’ are broad in scope, they are typically subsidies or aids businesses cannot obtain on the open market.
Rules around state aid are outlined by the European Commission to prevent the potential distortion of competition and trade. However, since the Comprehensive Free Trade Agreement between the UK and EU came into effect on 1 January, rules around subsidy control are changing. EU rules still apply when aid is granted within the jurisdiction of the Northern Ireland Protocol or if there has been a disbursement of outstanding Structural Funds payments.
As these are corner cases, we’ll focus on what these relatively new rules mean for your client.
The UK is currently bound by international commitments on subsidies due to its continued World Trade Organisation (WTO) membership. For the purposes of economic fairness, public authorities are limited to giving out one form of notified state aid per project. In addition, there is guidance from the WTO on the characteristics of subsidies, which you can read on the gov.uk website.
Government grants and the SME scheme
As previously mentioned, the SME R&D tax credit scheme is classed as notified state aid, mainly because of the high percentage of relief offered by the scheme. This means notified state aid grants have the potential to conflict with your client’s SME claim, however, this will hinge on how the funding has been separated between people and project costs.
For the purposes of R&D tax credits, the funded portion of a businesses’ projects that are funded by non-state aid grants must be claimed through the RDEC scheme. However, the rest of an R&D project’s qualifying expenditure can be claimed through the SME scheme as normal.
Government grants and the RDEC scheme
Unlike the SME scheme for R&D tax credits, the RDEC scheme does not count as notified state aid. This allows companies to claim for qualifying R&D costs that have been subsidised by government grants. SMEs (i.e. enterprises with fewer than 500 employees, plus a turnover of under €100 million, or gross assets of less than €86 million) can also use the RDEC scheme to claim for subsidised costs they wouldn’t have been allowed to claim through the SME scheme.
According to HMRC, SMEs can claim for R&D expenditure disallowed by the SME scheme if:
The expenditure in question would have qualified for R&D tax relief if the SME was a large company.
The only reason for the expenditure not qualifying under the SME scheme is because it was subsidised by grant funding.
The RDEC scheme also allows for corner cases within certain grant schemes, whereby your client may be able to access finances for parts of expenditures. We discuss this on a case-by-case basis further down.
Grants that do and don’t work with R&D tax credits
When determining how a grant will interact with R&D tax credits, you’ll need to ask the following two questions:
Is it categorised as notified state aid?
Have the funds been used to directly finance your client’s R&D project?
If the answer to both of these questions is no, R&D tax credits should be claimable alongside the grant you’re looking at. Note that the actual amount of funding received does not influence the compatibility between grants and R&D tax credits.
Types of government funding
Many of the following examples are major sources of government funding brought about by the effects of Covid-19 business restrictions. They could potentially conflict with R&D tax credits, but this won’t always be the case. As such, we advise talking with your client to establish exactly how these grants have been used.
Future Fund
The Future Fund is delivered by the British Business Bank and provides support to UK businesses with a turnover of between £125,000 and £5 million. Although the scheme is now closed to applications, at the end of August 2021, 158 of the loans had been converted into equity shares. This shows the potential for the Future Fund to raise additional private sector capital for your client.
Funds provided by the Future Fund are not notified state aid. SMEs, therefore, are allowed to claim R&D tax benefits for non-funded portion of a project.
Recovery Loan Scheme
Launched on 6 April 2021, the RLS is designed to aid businesses with post-pandemic recovery and growth. Even though the RLS scheme is classified as notified state aid, your clients R&D tax credits claim won’t be affected. To be eligible, your client will have to prove their business’ viability before the pandemic and how it has been adversely affected since then. They must also not be in collective insolvency proceedings. You should be prepared to take out extra debt finance on behalf of your client as a result.
Lenders providing RLS support can give up to £10 million in the form of:
Invoice finance
Term loan
Asset finance
Overdraft
As the borrower, you will have 100% liability for RLS debt. Also note that if your client borrows more than £250,000, the lender can choose to take personal guarantees. These come with the following caveats:
No personal guarantees can be taken over Principal Private Residences.
Past £250,000, the maximum amount that can be covered is 20% of the outstanding balance of the RLS facility (this is after the business asset proceeds have been applied).
In the 2021 Autumn Budget and Spending Review, the HM Treasury announced that the Recovery Loan scheme would be extended for six months until 30 June 2022. However, from the start of 2022, the following changes will apply:
Funds will only be available for SMEs.
Finance will be capped at £2 million per business and £6 million per group.
Guarantee coverage for lenders will be reduced to 70%.
HMRC says businesses that have received funding through other coronavirus loan schemes, namely the Coronavirus Job Retention Scheme and the Coronavirus Business Interruption Loan Scheme, can still claim the RLS. Find the list of accredited lenders currently offering funding through the RLS here.
CBILS loans and RLS loans are both categorised as notified state aid, so if they are used towards the R&D activity this could reduce the benefit received on the funded costs.
It is worth noting that HMRC have stated that RLS loans will not be treated in this manner when it comes to their overlap with R&D tax relief, in spite of their state aid status. This is not the case for CBILS loans, which will continue to be treated as state aid when used for R&D expenditure.
Coronavirus Job Retention Scheme (furlough)
The Coronavirus Job Retention Scheme (CJRS) is not a form of notified state aid. Instead, it is classed as a subsidy. Because workers on furlough are not contributing to relevant R&D work (by virtue of them not working at all), HMRC expects these costs to be omitted from R&D claims.
However, HMRC recognises that holiday and sick pay are a valid aspect of R&D costs as they form a part of employees’ working time. As such, HMRC will allow any period during furlough taken as annual or sick leave to be included in staffing cost calculations.
Coronavirus Statutory Sick Pay Rebate Scheme
With this scheme, employers can recover two weeks’ worth of statutory sick pay for workers affected by the coronavirus. This is notified state aid and so cannot be claimed alongside R&D tax credits. Take care to make the distinction between this scheme and the CJRS.
Coronavirus Business Interruption Loan Scheme
Although it closed to applications in March 2021, the CBILS operated within similar parameters to the Recovery Loan Scheme, both in terms of facilities and lender guarantees. Its lenders offered up to £5 million to businesses that saw their cash flow disrupted and lost revenue as a result of Covid-19.
The Coronavirus Business Interruption Loan Scheme (CBILS) is classed as notified state aid, but it will only get in the way of R&D tax credit claims if it is specifically used to fund an R&D project.
Bounce Back Loans
The ability to claim Bounce Back Loans (BBLs) also came to a stop in March 2021. SMEs were able to use BBLs to borrow between £2,000 and 25% of turnover, with the maximum loan being capped at £50,000.
BBLs are a form of notified state aid. However, it will only interfere with an R&D tax credit claim if the funds directly contribute towards R&D projects. As this funding was meant to deliver all manner of financial support, your client may still be able to benefit from R&D tax credits.
De minimis aid
A grant is classed as de minimis aid if it provides less than €200,000 over a three-year period. De minimis aid, although typically lent by government structures. It is treated muhc like non-notifiable state aid, where the funded portion of a project will have to be claimed through the RDEC scheme, and the reamined can be claimed through the SME scheme. The EU’s innovation grants given out under the Horizon 2020 scheme is an example of de minimis aid.
Example: Notified state aid applied to an R&D project
Let’s take a look at an example of where notified state aid is applied to an R&D project. Your client may be faced with this scenario as a result of receiving project specific aid, such as funding from Innovate UK and GBER. Project specific state aid is funding that a business must allocate towards a certain project. This will mean the business can only claim R&D tax relief through the RDEC for that project.
Say the business has received a grant of £500,000, which they choose to invest in an R&D project (1), alongside £750,000 of their own money. At the same time, they invest a total of £1,500,000 in two other projects that are eligible for R&D tax credits.
Take a look at the R&D tax credit values that would apply:
Project
Capital Investment (£)
Grant Investment (£)
SME relief rate*
RDEC relief rate
R&D tax credit value (£)
1
750,000
500,000
/
13%
162,500
2
1,000,000
0
33%
/
330,000
3
500,000
0
33%
/
165,000
Total
2,250,000
500,000
/
/
657,500
So as a result of a total investment of £2,750,000, the company receives an R&D tax credit of £657,500. This gives an aggregate relief rate of almost 24%.
* This is the maximum possible relief rate offered by the SME scheme, this can vary depending on the expenditure and financial position of the business.
What should you do with this information?
Although some of these grant schemes have closed, they can still impact R&D tax credit claims because these can include projects from up to two years before the claims are made. It’s a likely scenario that your client will have R&D projects funded by both notified state aid and non-notified state aid.
While the percentage return on R&D work is less generous through the RDEC scheme, it is certainly still beneficial. Note that 33% is the maximum possible gain on investment through the SME scheme. Whether your client reaches this value depends on their financial position and the nature of the qualifying expenditure included in their claim.
State aid, notified or not, is aimed at benefiting businesses. Funding can be used for cash flow management, investment opportunities, and/or efforts to drive growth.
Determine the best course of action with made.simplr
When R&D tax credit claims are maximised, the financial benefits can be substantial compared to other sources of government aid. With made.simplr’s software, your claims will be easy and accurate. In addition, our R&D tax experts are happy to provide guidance on how grants can affect your clients’ claims.
A comprehensive, well-prepared, and accurate R&D tax credit claim is critical, not just for maximising your client’s claim but also for avoiding an HMRC enquiry.
R&D tax credit claims are reviewed together with their relevant supporting documentation and, if no further clarification is needed, processed fairly swiftly (usually within 28 days). It is the process of further HMRC clarification that is referred to as an enquiry.
In recent years, HMRC has started to scrutinise the accuracy of R&D tax credit claims in more detail, and enquiries are one of the chief ways they go about determining legitimacy. These tax compliance checks are merely security measures. So if you have nothing to hide, you have nothing to fear.
That being said, dealing with an enquiry from HMRC can cause major disruptions to the day-to-day running of your client’s business. There is also the risk of a reduction in your claim or penalties if the claim contains significant errors, as well as the risk of damaging the relationship your client has with the HMRC.
Fortunately, enquiries can be easily avoided. Follow the steps below to ensure your client isn’t caught out.
Why HMRC might launch an R&D tax credit enquiry
HMRC generally launches an enquiry when they dispute an R&D tax claim or need clarity on specific aspects. They also launch enquiries as part of their efforts to ensure government funds are distributed fairly. As your client’s accountant, you will be the person HMRC contacts regarding an enquiry.
The following could result in an HMRC enquiry:
HMRC finds inaccuracies or inconsistencies in the claim. For instance, this could be in the form of missing figures or information which isn’t clearly supported.
There has been a change in your client’s circumstances that affects the value of their claim.
HMRC wishes to review your client’s tax return, which also includes a review of their R&D tax credit claim.
Your client’s company or industry is one that HMRC are particularly interested in. They might want to focus their enquiries on this sector for various reasons.
In addition, HMRC opens enquiries randomly on a percentage of all R&D tax credit claims. This is done to test procedures and check the tax relief schemes are working as intended. As alluded to in the last point, a tax enquiry could be more likely if your client works in a field or industry that HMRC is currently interested in.
The enquiry process
Enquiries are typically launched around 28 days after the submission of an R&D tax credit claim. This is the timeframe HMRC aims to adhere to when reviewing claims. However, enquiries can start months after a claim submission. Your client will most likely receive a letter stating HMRC are performing a compliance check.
During the course of an enquiry, which can last several months, HMRC could ask to check the following:
Company tax returns, including your client’s self-assessment tax return.
Accounts and tax calculations.
PAYE records and returns for employees.
HMRC might send an inspector to your client’s place of work or ask them to come to HMRC’s offices. You, or a legal adviser, can accompany your client when this happens. Note that a penalty can be expected if your client refuses the visit. The only exceptions being if you’re seriously ill or affected by the death of a loved one.
Potential outcomes of a HMRC enquiry
The outcome of an HMRC enquiry can vary. Here are some of the costly ones to consider:
If HMRC are not satisfied, they can disqualify certain costs from your client’s claim, thus reducing its value. This can lead to repayments based on funding that was previously given. HMRC’s enquiries can cover material as far back as seven years that relate to an R&D tax credit claim.
In the rare circumstances where HMRC believes your client has attempted to subvert and defraud the taxpayer, they will implement penalties. These can be up to 100% of the value of the R&D tax credit claim.
Diversion of your client’s time and resources to address the enquiry is a third important consideration. HMRC enquiries can take months or even years to be completed. Answering HMRC’s questions may also require your client’s specialist employees, which takes up valuable time. Therefore, even if resolved, the enquiries could incur a high cost in terms of resources.
How to avoid an HMRC enquiry
Businesses can sometimes be put off from claiming R&D tax credits due to the risk posed by the outcomes just outlined. However, by adhering to this simple checklist, you should have no problem avoiding an HMRC enquiry:
Ensure your technical report demonstrates you understand HMRC’s definition of R&D and outlines how your client’s projects meet it.
Encourage your client to practise comprehensive, up-to-date record-keeping. Being transparent with company records will help improve the accuracy of your claim and relate it to your client’s R&D costs immediately.
Identify the staff member who has contributed most to overseeing the R&D work and get them to make the written parts of the accompanying report. Note that this person will not necessarily be in a senior role.
Ensure the reasoning used within the claim is robust. Why is this R&D work important? Be careful not to stray from HMRC’s definition, though. The staff member you’ve identified (see previous point) can help with this.
A well-prepared claim will withstand scrutiny and is your best weapon against an HMRC enquiry.
Sometimes an HMRC enquiry is unavoidable. If this is the case, there are certain things you and your client can do to ensure the time spent on the enquiry is minimised, while maintaining good relations with HMRC. The latter can help in deterring future enquiries.
It’s important not to panic. Handling an enquiry might seem daunting, but HMRC aren’t out to trick you. They merely want to ensure the R&D incentive schemes are fair and that the funds are being administered responsibly. So give them as much information as they need for them to do their job. Answer questions as directly and as clearly as possible. In short, a cooperative, professional, and friendly approach is best.
Why made.simplr?
Developed specifically for accountants, made.simplr’s all-in-one R&D software is not only fully compliant with HMRC’s guidelines, but fully automated, intuitive, and integrated with Xero. This means every step of your claim is meticulously planned and prepared, leaving little room for error.
Encouraging innovation is the primary purpose of the UK’s Research & Development (R&D) tax relief schemes. This is, in turn, part of the government’s goal of improving UK business productivity, performance, and competitiveness on the international stage. The government’s industrial strategy is to raise levels of R&D investment to be 2.7% of GDP by 2027, which requires increases in both public and private sector investment.
R&D tax relief provides incentives to boost investment in R&D work conducted by companies based in the UK. As a result, the schemes on offer are purposely attractive for innovative businesses across many disciplines. As your client’s accountant, it pays to know how they can benefit from R&D tax relief.
The incentives of R&D tax relief
The government has two schemes to encourage UK businesses to engage in innovative R&D work. The SME R&D tax relief scheme is open to businesses with fewer than 500 employees that have a turnover below €100 million, or a balance sheet worth less than €86 million. Meanwhile, the RDEC R&D tax relief scheme is open to all businesses bigger than this threshold. Both provide benefits in the form of a reduction in Corporation Tax. The maximum benefit that can be claimed through the SME scheme is 33% of the qualifying R&D costs; and through the RDEC scheme, it is 13%.
The SME scheme also includes the option for businesses to surrender their losses to obtain a cash credit. This is valued at 14.5% of the total loss surrendered. Whether or not this is the best course of action for your client will depend on a number of factors, which we discussed in our previous blog about The case for and against your client surrendering their losses for R&D tax credits.
The good news is that your client can still claim tax relief on qualifying R&D work even if the project goal has not been met. This is because HMRC understands that research and development is often a lengthy process and solutions to technical problems are not easily found. As a result, the risk that your client might usually associate with R&D work is lessened by the prospect of R&D tax relief. Risk often arises from the unpredictable nature of R&D work, and the process can spawn ideas that hit roadblocks, which may cost more than anticipated to resolve.
The benefits of R&D tax relief are extremely valuable for businesses as they provide an additional source of funding. Under the SME scheme, the tax reduction occurs below the line in your client’s accounts, whereas under the RDEC scheme, it is taxable income. In the latter case, you can therefore show the credit received as ‘other income’ to increase the value of your client’s profits before tax. This is optional though, so it is worth talking to your client about how they would like their tax credit to be treated.
Qualifying for R&D tax relief
To make R&D work as appealing as possible, HMRC offers R&D tax relief to businesses across all sectors. HMRC’s guidelines for qualifying R&D work reflect this, as they can be applied to all manner of projects. Here are the aspects of R&D work that can secure tax relief:
It seeks a scientific or technological advance.
It sought to, or did, overcome an uncertainty (a goal that has so far not been attainable by experts/technology previously developed).
It contains work that could not easily be done by a professional in the field.
Note that a project can involve developing a process, product, or service that meets these definitions. It can also include modifications or changes made to existing processes, products, or services.
To be eligible for claiming R&D tax relief, the only requirement is that your client is a limited company based in the UK, which is subject to Corporation Tax.
What does the data say?
UK spending on R&D has been increasing steadily since the introduction of R&D tax credits in 2000, both in terms of the total spent and as a percentage of GDP. According to ONS research, R&D investment in 2000 was 1.59% of GDP and £442.20 per person. In 2019, it was 1.73% of GDP and £576.70 per head. Between 1985 and 2019, there was a 96% overall increase in the total spent. In the Autumn Budget, the chancellor confirmed that the government still aims to increase R&D investment as a percentage of GDP to 2.7% by 2027.
According to government statistics, there were just 1,860 total SME claims in the financial year 2000-1. In the period 2019-20, this figure is estimated to be 76,225. The R&D tax relief schemes have come a long way since their introduction. For example, when the SME scheme was first introduced there was a minimum spend of £25,000 per year for each accounting period. Now, there is no minimum spend. Furthermore, HMRC has streamlined their guidelines over time regarding key information, such as their definition of R&D. With the chancellor announcing in the budget that data and cloud computing costs (the tax definition of which has yet to be outlined) will be claimable for R&D tax credits, it would seem the range of qualifying R&D expenditure is likely to expand further in future.
Realise these benefits with made.simplr
made.simplr’s online R&D tax credit management tool helps make the process of completing R&D tax credit claims straightforward. By making the benefits of R&D tax credits more accessible, we hope to aid you in upscaling and increasing the value and efficiency of your clients’ businesses.
A business in loss doesn’t necessarily mean that it’s failing. Startups, for instance, often experience a spending deficit to get off the ground and fund long-term investments. Data published by the ONS in August 2020 revealed almost 16% of UK businesses were experiencing costs greater than turnover, a further 13% said they were breaking even, and nearly 27% weren’t sure of their financial position.
Many businesses believe R&D tax relief is reserved only for profitable companies and so miss out on the benefits. In truth, the SME tax relief scheme aims to support loss-making businesses by granting R&D tax credits as a cash injection.
HMRC provides R&D tax credits in exchange for the business surrendering its losses. However, surrendering losses carries an opportunity cost that might not always be in your client’s best financial interest. As your client’s accountant, it pays to be aware of their expected financial needs to get the most out of their R&D.
The Finance Act 2021 provides a temporary two-year extension to the timeframe outlined in these rules. It applies to accounting periods that end between 1 April 2020 and 31 March 2022.
Thus, carry back rules have broadly been extended from one previous year to three previous years. Companies can use any unused balance of the losses from an accounting period, as long as the business remains in the same trade for 12 months. If an accounting period doesn’t fit neatly within this period, the profit that can be offset is apportioned accordingly.
Losses are also flexible in how they’re utilised as they can be brought forward to future accounting periods. Trading losses carried forward can be offset against subsequent trading profits or the total profits of an accounting period. However, if the business’s profits exceed £5m, there are limitations to the amount that can be offset. If this is the case, no more than 50% of these profits can be covered by carried-forward losses.
When companies experience losses, they’re not excluded from claiming R&D tax relief. The SME R&D tax relief scheme allows these companies to claim a tax credit in exchange for their losses. This grants a cash credit worth 14.5% of the total of losses surrendered.
Let’s look at an example of how this works:
Your client has a total expenditure of £75,000.
£50,000 is qualifying R&D expenditure, so it experiences an uplift of 130% under the SME scheme. As a result, £50,000 x 130% = £65,000.
The company had a loss of -£25,000, and this is enhanced by £65,000 for a total of -£90,000 in loss for tax purposes.
The value of the R&D tax credit is based on either the total uplifted loss or 230% of the qualifying R&D expenditure (£115,000), whichever turns out to be the lower value.
Therefore, the cash credit is calculated using the uplifted loss: £90,000 x 14.5% = £13,050.
If the company decided instead to carry forward the enhanced loss, they’d receive a benefit of reduction in future corporation tax of £90,000 x 19% = £17,100. The trade off being that no cash is received immediately, and the benefit is only experienced once the company has enough taxable profit.
However, there are benefits to holding onto losses, one of which is the ability to capitalise on past successful years. The benefit comes as a repayment of tax already paid. Therefore, in periods where tax rates have been falling, carrying losses back to previous Corporation Tax rates will grant a greater repayment. Loss carried back can also come with a small interest repayment from HMRC. Companies that are part of a group but that don’t have a previous profitable period to utilise can transfer the loss to a profitable group member.
Carrying losses forward also allows profits in future accounting periods to be offset. Losses incurred in accounting periods before 1 April 2017 can only be used against profits from the same trade. Beyond this, losses can offset total profits. While this encompasses most forms of loss, HMRC outlines rules for accountants to consider when carrying the different types of loss forward.
Our advice
Start by considering whether your client will likely become profitable by the end of their next accounting period. It’s worth getting involved in discussions about their business roadmap to determine this. With the right information on hand, you can make an informed decision regarding the surrendering of losses.
Holding onto losses is only advisable when there are profits that can be offset against it. If your client doesn’t expect to be profitable in the next few years, and they weren’t profitable in the past three years, R&D tax credits in cash are likely the best option. As demonstrated in the above example, the total R&D expenditure will impact how their R&D tax credit is calculated. Therefore, it’s critical to have a clear understanding of how much qualifying R&D work your client has undertaken during each accounting period.
In addition, if your client is a fast-growing business, having cash in the short term could lead to a higher return on investment over time. If this is the case, the 14.5% cash credit could generate more value than the carried over losses, and the R&D tax credit option is more appealing.
Finally, startups can benefit from surrendering their losses before they’ve paid HMRC any form of tax, so it’s critical to check in with your client on this.
Let the experts help! Making accounting decisions, such as surrendering losses or claiming R&D tax credits, often involves analysing a substantial amount of business data. With made.simplr’s online R&D tax credit platform, you’ll be able to access your client’s figures through Xero integration and, from there, apply it directly to completing R&D tax credit claims.
The UK government currently offers businesses two types of incentives to do Research & Development (R&D):
R&D tax relief (which includes a tax deduction or R&D tax credits), and
Research and Development Allowances (RDAs).
While much of the focus in our blogs has been on R&D tax credits, it’s important to discuss the value of the often overlooked RDAs and how, when combined with R&D tax credits, they can offer significant savings.
What are RDAs?
RDAs are a specific form of capital allowance for research and development capital expenditure. UK businesses qualify for a 100% tax deduction on these expenses in the year they’re incurred and there’s no limit on the amount that can be claimed. The total qualifying costs are deducted from your client’s taxable profits, reducing the company’s corporation tax.
Other types of capital allowances
There are a few types of capital allowances that provide tax relief for UK businesses. For each, a set number of conditions must be met before a business can claim tax relief. In addition, each type of capital allowance qualifies for tax deductions at differing rates. For example, Plant and Machinery Allowances (PMAs) allow for an 18% deduction each year.
Then there’s the Annual Investment Allowance (AIA), which was introduced in 2008 to stimulate economic growth in the wake of the financial crisis. The AIA allows UK businesses to deduct the costs of purchasing equipment from their taxable profits. Currently, the limit on the amount of qualifying capital expenditure that can be used for the allowance is the highest it’s ever been at £1m. The government’s 2021 Budget and Spending Review recently announced this limit would be extended until April 2023.
The main differences between RDAs and AIAs are as follows:
Limits to the amount businesses can claim: With AIAs, there’s a limit to the amount of tax relief companies can claim; with RDAs, there isn’t.
The types of expenditure claimable: While AIAs include plant and machinery, office equipment and fixtures, RDAs offer a wider range of qualifying expenditure. We go into further detail in the paragraph below, but it includes many capital expenses related to R&D, with the exception of land and intellectual property.
All capital allowances, including PMAs, AIAs and RDAs, are claimed on your client’s tax return.
What expenditure can your clients claim for RDAs?
According to the HMRC Capital Allowances Manual, qualifying expenditure is capital expenditure that a trader incurs on R&D directly undertaken by the trader or on the trader’s behalf provided that:
the R&D is related to a trade that the trader carries on; or
the trader sets up and commences a trade connected with the research and development.
Examples of capital expenditure that qualify for RDAs include:
Building facilities for R&D. For example, a building that features an R&D centre will qualify for capital allowances if the R&D facility makes up at least 75% of the building’s total cost.
Laboratory equipment.
Plant and machinery (P&M).
Company vehicles for staff working on R&D projects.
Any equipment, IT systems, or facilities that have specifically been purchased for the purposes of R&D.
Example calculation for RDAs
To illustrate how much your client can benefit from RDAs, let’s use the example of a business that’s just invested in upgrading the space in which they run their R&D operations.
Capital allowances without RDAs
Capital expenditure (£000s)
Annual Investment Allowances (AIAs) (100%)
Plant and Machinery Allowances (PMAs) (18%)
Total non-qualifying expenditures (£000s)
Land
500
/
/
500
Plant
150
150
/
/
Equipment
1000
850
27
/
Fixtures and fittings
100
/
18
/
Building
250
/
/
250
Total capital allowances
2,000
1,000
45
750
The total deduction here is the AIA and the PMA added together, which equates to £1,045,000. With corporation tax at 19%, this translates into an overall tax saving of £198,550.
Capital allowances with the inclusion of RDAs
Capital expenditure (£000s)
Annual Investment Allowances (AIAs) (100%)
Research & Development Allowances (RDAs) (100%)
Plant and Machinery Allowances (PMAs) (18%)
Total non-qualifying expenditures (£000s)
Land
500
/
/
/
500
Plant
150
150
/
/
Equipment
1000
850
150
/
/
Fixtures and fittings
100
/
100
/
/
Building
250
/
250
/
/
Total capital allowances
2,000
1,000
500
0
500
With RDA included, the business benefited from a more significant tax deduction (£1,500,000). This translates into a tax saving of £285,000 and, therefore, an additional benefit of £86,450.
How do RDAs complement R&D tax credits?
It’s important to be aware of how RDAs differ from R&D tax relief and how the two incentives can interact to benefit your clients’ businesses.
As we’ve explained above and in previous blogs, RDAs relate to expenditure on fixed assets, while R&D tax credits relate to operational costs, namely contracting, materials, and staff costs.
HMRC is consistent in its definition of R&D across the RDA and R&D tax relief schemes. If your clients’ R&D projects fit this definition, they’re likely to qualify for the benefits of both. Note, however, that businesses only qualify for RDAs if they’ve invested in capital assets in their pursuit of R&D. Your clients also cannot claim R&D tax credits and RDAs on the same expenditure.
When used together, R&D tax credits and RDAs can help your clients generate a scalable R&D benefit that boosts their cash flow. RDAs share a similar claims schedule with R&D tax relief, so it’s usually best to claim for both at the same time.
Let’s look at an example of how a business can benefit from using both schemes:
As in the earlier example, this hypothetical company is expanding its existing, dedicated R&D building. They’ve acquired £300,000 through successful R&D tax credit claims, and they’re now constructing a new research facility.
The total investment is broken down as follows:
£150,000 for construction work
£150,000 for equipment
£70,000 for labour
As mentioned before, building costs don’t qualify for capital allowances. However, the equipment costs can be deducted in full using the AIA.
If the business consulted an R&D tax specialist, they would have realised that part of the build-costs could be eligible for RDAs , as the building is going to be used for this purpose. As a result, an additional £50,000 of these costs can now be deducted, creating a further tax saving of £9,500.
According to the business’s R&D tax advisor, the labour costs involved in setting up and checking the equipment will qualify for R&D tax credits. . The R&D tax relief for the labour costs incurred can grant an additional benefit of at least £17,290. Wages for staff working on R&D projects don’t count as an RDA, so R&D tax credits help fill this gap.
Due to the varied nature of most businesses’ capital expenditure, your clients’ capital expenses are likely to fall into more than one category. If you know what to claim for, as well as how R&D tax credits and RDAs can complement each other, you can help the SMEs in your care to maximise their claims.
Get in touch with made.simplr
With the help of specialised R&D tax credit software, you can easily maximise your clients’ claims. Our software is fully integrated with Xero accounting, making it simple to connect your clients’ financial data and add an R&D-related claim. This increased efficiency and organisation can help your client scale their R&D practices, thus allowing more capital assets to be brought into future AIA and RDA claims.
Chancellor Rishi Sunak announced the UK’s Autumn Budget and Spending Review 2021 on 27 October, which outlined the government’s future economic plans. With the effects of the pandemic continuing to underline much of the government’s spending, it’s not surprising that most of the budget focused on the recovery of the UK economy.
Alongside general economic support measures, the budget also includes significant updates to the UK’s R&D tax credit scheme. These come in the form of greater investment in innovation and more eligible R&D costs. Many of these changes were influenced by the consultation that took place during the Spring Budget 2021.
The changes to the R&D tax credit scheme are:
The expansion of qualifying expenditure with regards to software. In an effort to support modern research methods, qualifying expenditure will now include cloud computing and data costs, the details of which have not yet been released. This development has been a long time in the making, with the many industries that use cloud-based software calling for an update to HMRC’s policy.
Refocusing R&D tax credits to innovation in the UK.Under the current R&D tax credit scheme, companies can claim tax credits on R&D work that is subcontracted worldwide. However, the Chancellor announced that the government will be refocusing reliefs towards innovation in the UK, which could have implications on overseas R&D. While we don’t know what steps the government will take, the aim is to improve skills and knowledge, and encourage investment in the UK.
An overall increase in R&D investment: The Chancellor also announced that the government will invest £20 billion in R&D by 2024/25. This idea is to increase R&D expenditure to 1.1% of GDP, which is well above the 2018 Organisation for Economic Co-operation and Development (OECD) average of 0.7%. He maintains this will culminate in the target of £22 billion annual R&D investment by 2026/27. This expenditure does not take into account the amount the government will allocate towards R&D tax relief.
An extension of the temporary Annual Investment Allowance of £1m. To stimulate R&D work in the medium term, the Chancellor also announced that the temporary £1m Annual Investment Allowance (AIA) is to be extended to March 2023. The temporary AIA increases the limit from £200,000 to £1,000,000 for expenditure on plant and machinery costs. It was introduced at the start of 2021 and was due to end this December.
What do these changes mean for the future of UK R&D tax credits?
The budget also included many plans that the government said it would fulfil in relation to R&D tax relief in the years to come.
As mentioned previously, one of these is an increase in UK R&D investment across the board. According to Oxford Economics, on average every £1 the government spends in public R&D generates £2 of private R&D investment. Through this investment, the government is looking to drive economic growth by allowing forward-thinking businesses to prosper and lead the way. This investment will not only create more jobs in the future, but could also help companies with the high entry costs associated with R&D work, which have traditionally been a deterrent for conducting R&D. Coupled with the financial benefits of R&D tax credits, it’s an exciting time to be involved in the running of innovative businesses that are undertaking groundbreaking R&D projects.
The budget also confirmed the 25% Corporation Tax rate for companies with profits over £250,000, which will also come into effect from 1 April 2023. Companies claiming under the SME scheme will receive a higher net benefit, while those claiming through the RDEC will experience a slight decrease in net benefit. The degree that the net percentage benefit will change will vary depending on profit levels from company to company. As a majority of UK businesses are SMEs, this is largely a positive change for R&D tax credits.
Another of these plans is to tackle abuse and improve compliance within the R&D tax credit scheme. This policy aims to ensure that the benefit of R&D tax relief goes to those that deserve it.
What does this mean for your clients’ R&D Tax Credits Claim?
The Finance Bill 2022-3 will be the next opportunity to legislate these plans, which will only take effect thereafter. This means, right now, it is unclear exactly how the government will implement these changes and how they will directly affect your clients’ R&D tax credit claim.
We do know, though, that these changes are due to come into effect in April 2023, and since HMRC allows work to be included in a claim up to two years after the business’ accounting period, the R&D work your client is doing right now will be eligible for when the changes come into effect. So it’s worth preparing your client’s claim ahead of time. This is particularly relevant for R&D work done by your client outside of the UK, because, as mentioned above, HMRC is due to change their policy as part of efforts to refocus UK R&D.
In time, HMRC will outline exactly what new types of R&D work will be able to qualify for R&D tax credits so be sure to follow our blog for updates. A reminder that the project needs to have been undertaken within two years of the end of your client’s last accounting period. This specifically applies to companies working with cloud computing projects or projects centred around data. If any of your clients are conducting work in these areas, now is the time to start investigating if they are eligible to claim R&D tax relief.
While we might not know the details of how these changes will play out, it is clear that the R&D tax credit scheme will continue to support innovation, and these tabled changes will lead to more innovation, more skilled people, and a boost for the UK economy as a whole, which is altogether great news for your clients.
With made.simplr, completing your client’s R&D tax credit claim is simple and stress-free with our easy-to-use tax credit claim software. Our software will incorporate all the changes to UK R&D tax relief when they occur, so any uncertainty you might have as to whether your client;s claim is affected or not is mitigated. made.simplr integrates with the Xero accounting platform, which aids in the accuracy of your submitted figures. We also help you ensure your client’s claim doesn’t miss out on any qualifying expenditures, thereby maximising their R&D tax benefit.
The government designed R&D tax relief to reward companies who were conducting risky R&D work. However, since their introduction in the UK in 2001, R&D tax credits have not always been easy to understand or implement.
While the existence of R&D tax credits has become more widely known, many businesses are still unsure how exactly the scheme works. Whether it is a lack of education, a general confusion over the scheme or the assumption that they don’t qualify, there are a number of myths or misconceptions that may be dissuading your client from claiming R&D tax credits. In this blog post, we explore how these myths could actually be costing your clients money and preventing them from receiving a well-deserved cash payout or tax reduction.
This couldn’t be further from the truth. R&D tax relief is 100% legitimate and sanctioned by an official government body, Her Majesty’s Revenue and Customs. In recent years, HMRC has implemented extra measures to protect R&D tax credits from fraudulent claims. You now need to submit an accompanying CT600, plus computations, to make amendments to Corporation Tax returns. In fact, the increased complexity of the claims process over the years has all been in the name of security and fairness. In March 2019, the government published the main points of discussion from their consultation to prevent abuse of the R&D tax credit scheme for SMEs. The central proposition was to install limits on the amount of Pay As You Earn (PAYE) and National Insurance Contributions (NICs) that can be included in a claim. This amendment was introduced in March 2021. Click here to read HMRC’s official statement on the matter.
Another source of mistrust among businesses looking to claim R&D tax credits is that, while tax advisers are part of larger groups that are partially regulated by HMRC, independent advisors are not regulated at all. The solution here is simple; make sure the tax specialist your client employs has the required credentials and reputation in the industry.
Myth 2. The cost of hiring an expert outweighs the benefits
Your client can certainly save money by completing a claim themselves. We don’t recommend it, for the following reasons:
Firstly, gathering the necessary information in-house and ensuring it is correct will take a significant investment of your client’s time and resources, which takes them away from the day-to-day running of the business.
Secondly, as their accountant, you will have to take the reins in completing what could be an unnecessarily complex claim.
Finally, any inaccuracies, however minor, could lead to an HMRC enquiry, and this may in turn mean not only wasted time but financial penalties for your client.
R&D tax credit experts don’t only check your claim for mistakes. They remain abreast of the latest HMRC guidelines and legislation and know exactly how to submit your client’s claim to get the maximum monetary benefit available. The resulting cash payout will likely far exceed the cost of employing a tax specialist and/or using specialist R&D tax credit software.
Myth 3. My client isn’t profitable, so they can’t claim
This is simply not true. Unprofitable businesses are able to surrender their losses to receive a cash credit for their qualifying R&D work, which is calculated at 14.5% of the total loss surrendered.
Myth 4. My client can only claim R&D tax credits on successful projects
A successful project is determined primarily by whether it succeeds in resolving the uncertainty it set out to resolve. However, the attempts made to resolve an uncertainty within a field are also defined as qualifying R&D work by HMRC, so even if the project was unsuccessful, it is still eligible for R&D tax relief. This makes sense, seeing as research and development involves experimentation and risk-taking.
Myth 5. You can only claim R&D tax credits when you submit your current annual accounts
First-time claimers, in particular, tend to be under the false impression that they can only claim R&D tax credits on submission of their annual accounts. While businesses do have to submit claims during or after their annual accounts have been filed with HMRC, they can claim R&D tax credits for two previous financial periods. Your client can claim for R&D projects from either accounting period but each financial period has to have an individual filing. We recommend starting with the projects that date back the furthest as they will be the first to expire. Not doing so could cost your client the money an R&D tax credit would’ve saved them on this work.
Prevent unnecessary costs with made.simplr
made.simplr’s R&D tax credit claim software has been designed by R&D specialists who understand the pain points of R&D providers. We’re here to debunk the myths surrounding R&D tax credits, help scale up your operations, and maximise your clients’ claims, not only saving them money but ensuring the maximum in credit or relief. No risk, 100% accurate, fully automated, HMRC compliant, and cost-effective. made.simplr is the R&D tax credit software solution for you.
The Business Statistics briefing paper, published in January 2021, reveals there were approximately 6 million small and medium-sized enterprises (businesses with less than 250 employees) operating in the UK in 2020. These figures show that small businesses, which for the purposes of R&D tax credits also includes micro-businesses (less than 10 employees), accounted for 99% of all businesses in the UK.
It is not surprising then that small businesses submitted the vast majority of R&D tax credit claims in 2020-21. Data from the Office for National Statistics has the number of SME scheme claims at 76,225, a 16% increase from the previous year. The range of small businesses operating in the UK is vast, and naturally, the effects of tax relief for each individual company varies considerably. But in light of these statistics, it’s worth taking a look at some of the influences the R&D tax incentive has on small businesses.
The defining characteristics of small businesses
To understand the effects and influence of R&D tax credits on small businesses, we need to be cognisant of their priorities, pitfalls and how they operate.
Less annual revenue: Small businesses often deal in small-scale operations. By definition, the numbers involved in these companies’ projects are smaller. This doesn’t mean they are less likely to be profitable, but it can often mean that their cash flow is monitored more closely.
Largely a sole proprietorship or partnership: Small businesses are usually managed by an individual or a few individuals. One significant implication when it comes to tax relief is that the business’s earnings and expenditures can often be found within the owners’ tax returns.
Limited reach: In a lot of cases, small businesses operate out of a single location which might even be the owner’s home – a home baking business or local retail store, for example. As a result, small businesses often serve their local surrounding area and do not branch out to other parts of the country.
R&D Tax credits create a reduction in corporation tax a business is liable for.
The main benefit of the government’s R&D tax incentive scheme comes in the form of corporation tax reduction, however, tax credits are also available for loss-making companies. The SME scheme allows loss-making companies to surrender their losses and in turn, receive a cash credit worth 14.5% of the total loss surrendered.
Effects of R&D tax credits on small businesses
When it comes to a small business, R&D will often focus predominantly on improving products and creating new ones. Here are some of the positive influences R&D tax credits can have on small businesses:
R&D becomes more accessible: R&D work often comes with risk in the form of significant amounts of cash investment. This risk is sometimes amplified for small businesses where access to capital might be limited. R&D tax credits reduce the financial risk associated with R&D projects by ensuring an additional return on investment. If this return comes in a monetary form, the business is free to employ the funds however they see fit. This could be used to reinvest in further R&D, thereby covering some of the initial investment.
Source of short-term funding: HMRC aims to pay out R&D tax credits to small and medium-sized companies within 28 days of claim submission. It can then take up to 10 days from when the claim is approved for your client to receive the money. While other factors might affect the repayment time of R&D tax credits, such as peak claiming periods and seasonal variance, it is still a relatively quick turnaround.
Complementary to other forms of government funding: You can still claim R&D tax credits if you have received other government funding. However, if the funding is classed as ‘notified state aid’, your client will have to claim through the RDEC scheme. This is because SME tax relief counts as notified state aid, and a company cannot receive two different types of notified state aid for a project.
made.simplr provides an easy and simple software solution for processing R&D tax credit claims for your client’s small business. With it, you can automate your client’s claim, manage the entire process online, and benefit from an intuitive system. Our name says it all – our goal is to simplify the R&D claim process safely and reliably, saving you time and adding value to your clients.
As an SME, R&D work is often essential to improving efficiency and growing the business. Receiving a cash payment or a reduction in tax liability due to R&D tax relief is a great way to help offset the cost of R&D projects.
R&D tax relief for SMEs
The SME tax credit scheme is the primary avenue for SMEs looking to claim tax relief on their R&D work. SMEs consistently make up the majority of businesses claiming R&D tax credits in the UK, and the most recent data from the ONS confirms this. During 2020/1, 76,225 of the 85,900 total R&D tax credit claims made were submitted by SMEs. Furthermore, this year saw the amount of relief claimed through the SME scheme increase by 25% on the previous year.
The scheme grants tax relief at a total of 130% of a company’s qualifying R&D costs. As the amount of relief is proportional to the money spent on qualifying R&D work, the scheme rewards companies who invest more in R&D.
R&D tax credits do come with complexities, so we have compiled these six insider tips to help equip you to deliver the maximum benefit to your client.
6 top tips for SMEs to make the most out of R&D tax credit relief
Understand the size and structure of your client’s business.
According to HMRC, to qualify as an SME, there are a few criteria businesses must meet:
Employ fewer than 500 people and,
have a turnover of less than €100m or;
have a balance sheet worth less than €86m.
The size of your client’s business is important as it will inform which scheme they can claim through, affecting the percentage of tax relief. The ties your client has with other businesses, such as linked companies and partner companies, can also affect their claim.
A linked enterprise is one that owns more than 50% of another business.
A partner enterprise is one that owns between 25% and 50% of another business.
Company structure is a significant consideration as the employees, turnover, and balance sheet will affect the calculation of the size of the applying business for R&D relief.
2. Be certain of what your client can claim for
Arguably, the most important aspect of R&D tax credits is identifying your client’s projects that qualify as R&D, as well as the eligible costs. Seeking expert insight into the R&D projects will go a long way in maximising your client’s claim.
Loss-making SMEs are able to gain a tax credit through the SME scheme by surrendering their losses. As a result, SMEs can benefit up to 14.5% of the total loss surrendered. This system can provide a valuable short-term cash injection for SMEs experiencing a downturn.
Do note, though, surrendering losses is not always the best decision going forward. If your client expects to become profitable again the following year, surrendering their losses will remove the option of using these losses to offset future Corporation Tax.
4. Make sure your technical narrative is top-notch
The technical narrative is the main written element of an R&D tax credit claim. In it, you need to explain how each project within the claim seeks to overcome technological uncertainty through R&D work. If your client is claiming R&D tax relief for up to three projects they will need to provide full details of each. If they are claiming for four or more, at least three will need to be described in detail (up to a maximum of 10) which together need to cover at least 50% of the qualifying R&D costs within the claim. This is part of HMRC’s R&D tax relief guidance for SME businesses.
Here are some key tips for writing the technical narrative:
HMRC isn’t interested in the project’s managerial or logistical challenges – keep the focus on technical issues/advances.
Refer back to HMRC’s definition of qualifying R&D and make sure you’ve explained clearly how your client’s project meets these criteria. Eg. sought an advance in science or technology, had to overcome scientific or technological uncertainty, and could not easily be worked out by a professional in the field.
Simple is best – short technical narratives are by and large easier to review by HMRC. For the same reason, avoid using jargon that is specific to your client’s field.
Include details of unsuccessful projects – these demonstrate R&D work just as much as successful ones.
5. Review the claim before submission!
This almost goes without saying but because it’s so important, we’re saying it anyway! Mistakes or inaccuracies at any stage of completing an R&D tax credit claim have the potential to result in an enquiry by HMRC. An enquiry requires your client to reroute time and resources which could be better utilised.
