R&D tax credit

[CT1212]

I met a R&D tax credit advisor at a business networking meeting. He said my business could claim the R&D tax credit for the new jewellery we designed over the past 3 years; he also told me he had helped lots of other businesses to apply successfully. I have done the due diligence on his company and they have no bad review. However, I was reading about R&D tax credit on the government website, it says it is only for projects that prove to be an advance in science or technology.

I raised my concern with this advisor, as I am not sure our design process would meet the criteria of advance in technology. However, he told me I would be fine to go ahead with the claim and he operated on a no win, no fee basis.

Do you have any experience with R&D tax credit? Many thanks.

 

[simon field]

I met a R&D tax credit advisor at a business networking meeting. He said my business could claim the R&D tax credit for the new jewellery we designed over the past 3 years; he also told me he had helped lots of other businesses to apply successfully. I have done the due diligence on his company and they have no bad review. However, I was reading about R&D tax credit on the government website, it says it is only for projects that prove to be an advance in science or technology.

I raised my concern with this advisor, as I am not sure our design process would meet the criteria of advance in technology. However, he told me I would be fine to go ahead with the claim and he operated on a no win, no fee basis.

Do you have any experience with R&D tax credit? Many thanks.

We’ve had a similar company (who we approached) starting to have a look into this for us recently.

Once we get the ball rolling over the next few days I’ll post here…

 

[DazRave]

I am not sure our design process would meet the criteria of advance in technology

Maybe they are good at putting together arguments to win the credits. Such as the design of the jewellery helps reduce emissions/costs/waste or that you have used new techniques in the design process and they go in on a slightly loose angle such as that.

 

[Mark T Jones]

The simple answer is that you have nothing to lose.

They will now the system, and potentially loopholes where you can fall under the qualifying R & D banner.

 

[SillyBill]

We do this and I have not been at all comfortable at times with a lot of the advice that our "advisors" have given to us. One of the leading national companies offering R&D claim assistance too. Telling us to in effect "beef up" our R&D costs beyond what we outline so that we get a bigger sum back and of course their cut goes up. We haven't done as they've said, namely because a) it is immoral and fraudulent and b), well, I just don't want the tax man at my door 5 years from now investigating and asking for tens of £k back + interest. Plenty of people have been caught out by HRMC for stuff done years ago. There are a lot of companies out there (so many spam calls we get now are R&D advisors) IMO that are poorly advising and I think a national scandal is brewing. It feels like a miss-selling scandal to me what with the sorts of clowns (mostly unscrupulous salespeople, not tax experts) now getting every man and his dog to bang claims in.

Our accountants also pre-warned me that HMRC are getting wise to it now as before they just used to rubber-stamp everything immediately, now more clients get queried. I wouldn't be surprised if they start investigating and clawing back when it gets exposed. It is fast approaching the point where I would be expecting the local chippie to tell me they're now started claiming r&d credits. I actually have a laboratory and employ a full time R&D person and a couple more supporting it as part of their roles and I look to rule out any activity (reverse formulating etc.) that isn't a genuine "advance" in the field. Which I think also annoys our advisors who seem to think our claim should be multiples of what it is.....Don't want to put you off, as I say we do it and we benefit from it (about £15k a year we get back) but I just want to make the point as a taxpayer too that I am getting pretty concerned about the value for money we're getting from this scheme, like the Covid bounceback loans incidentally, it is being roundly abused by poorly advised or willingly fraudulent companies that make zero advances to science or technology and yet take our tax money. It was obviously a scheme designed to help our country genuinely foster innovation (which it needs to) and I'll be mightily disappointed when it gets canned, as it will, because we've got nothing out of the tax breaks.

 

[The Byre]

It is fast approaching the point where I would be expecting the local chippie to tell me they're now started claiming r&d credits.

I love the idea!

The more I get to see the workings of Her Majesty's Government and its civil servants, the more I come to the conclusion that they are all, to a man, completely and utterly out of their depth in every possible way!

We dealt with the German version of this, and one has to have an independent evaluation of any R&D and its accompanying documentation. Usually, that sort of evaluation will have to come from (for example) one of the seven TÜVs (Technische Überwachungsvereine) though there are other bodies that are acceptable such as Uni departments and private companies.

It can be quite a process and fortunately, I was not involved! But it does sort out the wheat from the chaff.

Large companies have whole departments loaded with lawyers and specialists that are dedicated to getting grants and tax rebates from Papa Staat (Daddy State). If you are a giant company like Bosch or VW that has huge R&D budgets, it can mean that all (or at least some) of your corporation taxes come fluttering back to you in the form of R&D grants.

It is the open secret of how Germany is able to flout EU rules about not subsidising industry - a kind of backdoor subsidy!

 

[youcangetjules]

I would recommemd you look into this very carefully beforehand. HMRC are looking very closely at most R&D claims these days. I have just come out of a 2 year battle with them which I won and they granted relief, but the amount of work I had to go through to convince them was incredible. And this is genuine advances in the telecommunications industry, and submitted to 3GPP, the standards body, where it was somewhat modified but eventually became a work item which will appear in the specifications. So yes, a fair amount of blood sweat and tears went in.
HMRC disputed it and disputed it, I had I think 3 separate major submissions to them where all of the orignal material was submitted along with some (all up across all 3 submissions) 60+ pages of notes. THat was a terrific amount of work for what ended up to be not that much tax relief in the outcome.
I'm not saying that you will be as unfortunate as me, R&D tax credit specialists would have taken £5k which was all I was granted in relief, so just do your homework first.
And whatever you do, dont try and diddle the system by beefing up the hours - whilst they may struggle with the ins and out of the technical explanations, they are the experts in the number crunching as to what you are claiming and how much you will get.
Finally, they are actually really reasonable - yes I had a lot of work to do with my submissions, but they were happy to speak with me over the phone and they did finally come around to my way of thinking.
Oh - and I dont know of any R&D tax credit specialists who work on a no win no fee basis - they have to put in a significant amount of work up front which they could potantially lose money on if they discover its not going to cut it - maybe they exist, in which case - yes, go for it, you have nothing to lose then.
Good luck.

 

[downhill racer]

We applied for this and received enough of a tax credit to offset our corporation tax and it most definitely was not for an advance in technology. The company you use if they are good will help you with the wording of the claim to increase your chances of success.

 

[DWS]

The problem is just because you receive the R&D credit does not mean that it was a valid claim, plenty of Companies out there are bumping up the claims or even claiming for R&D when it is not warranted so they get a higher fee, don’t get me wrong most claims are perfectly legitimate but HMRC seem to be looking at R&D claims in greater detail.
It’s your business that HMRC will expect a repayment from not the R&D company!

 

[Robert NW]

I am a chartered tax adviser with a practical knowledge of R&D claims. What you "have to lose" is:
a) your time
b) interest, penalties on incorrect CT submission
c) fines
and of these, time is the heaviest. Think of six months where one third of your time is pent dealing with an enquiry, if you work in an SME. Now you could make the argument that HMRC are not going to spend time on this - actually they're making noises that they will, and they can go back 7 years.

From what you've said - design of new jewellery - I would say that does not qualify. One does need to look for improvements in the process - a new tool for instance, or new analytical techniques.

If the person claiming to process the R&D claim makes a contingent fee, that's a red flag (i.e. go somewhere else). If the person is not tax qualified that's a red flag. It is not the submission of the claim that is costly. It is (a) finding what you really can legitimately claim for that you probably never thought of: (b) the required setting up of the record trail to answer an HMRC enquiry: then (c) dealing with HMRC when they call.
Limiting the service to the submission is a sign that they don't care about the result.

Which leaves you where? If you know you create your own solutions then do some homework on R&D criteria before you talk to your tax adviser. It's worth it, but put in five to ten hours thinking about it first.

 

[Steve7867]

Most new ‘R&D specialists’ that operate on a no win no fee basis have decent knowledge of the scheme, and will not offer support should you be flagged for enquiry.

Advice to beef up costs just to get a higher credit is silly advice. HMRC have people that are good with numbers and are not stupid. Sure the projects claimed can sometimes be more of a grey area as long as they’re not silly as they have to be an advance that has uncertainty defined by the guidance. When it comes to beefing up costs however, they’re are easily noticed if HMRC come knocking.

The agent may well be operating on a no win no fee, but it will be the company that get a penalty if it all goes wrong, not the agent, as it’s not their return.

 

[Nighthawk Software]

I'd be very careful with using an "R&D" specialist.

Don't forget these guys are working on a commission basis. It's therefore in their interest to encourage you to claim more than you are entitled. They get a higher commission, and don't have to face the consequences.

You do.

The HMRC can come after you for up to 7 years worth of R&D claims. If they decide your claim wasnt valid, then you're forced to repay all the tax you claimed, plus fines. Meanwhile the "R&D Specialist" gets to sit there and brag about how great a job he did, saving you thousands in tax (he may even have a testimonial from you on his website). Good luck getting a refund on the commission you paid him.

Now you're out the tax, the fine and the commission you paid.

Maybe not a concern of the small business, but for some larger businesses R&D credit claims can also cause problems in mergers. If the buying company looks at those tax claims and feels they are excessive, it might well (and has!) scupper the deal. The buying company is also taking on the risk of having to repay those false claims + fines.

I'd speak to your accountant, they should be able to advise you just as well as any specialist, and will do so free of charge rather than on a commission basis.

 

[SillyBill]

I'd be very careful with using an "R&D" specialist.

Most of the "tax specialists" you come across are just-out-of-university graduates, no doubt on terrible basics (£20k a year or so) but commission focused for how much they can "sell", i.e. how many clients they can win and the value of those clients' claims. The hard selling on R&D tax credits is now up there with the other myraid of hard sells business owners have to field against every day (for us that is currency exchange, energy etc.). Most of my LinkedIn private messages are young grads reaching out to me to enquire about what they can save me on R&D rebates. It is like the shoeshine boy moment with stocks, the more this happens, the more businesses that get involved who have absolutely no business to be doing it, you get uneasy about how it unravels.

 

[Eric Feltin]

I met a R&D tax credit advisor at a business networking meeting. He said my business could claim the R&D tax credit for the new jewellery we designed over the past 3 years; he also told me he had helped lots of other businesses to apply successfully. I have done the due diligence on his company and they have no bad review. However, I was reading about R&D tax credit on the government website, it says it is only for projects that prove to be an advance in science or technology.

I raised my concern with this advisor, as I am not sure our design process would meet the criteria of advance in technology. However, he told me I would be fine to go ahead with the claim and he operated on a no win, no fee basis.

Do you have any experience with R&D tax credit? Many thanks.

A lot has changed since July 2022 when this post was made. HMRC is now querying over 20% of R&D Tax Credit claims whereas previously they looked into less than 1%.

The process of filing has also gotten more complicated and structured. First, (unless you have claimed the Tax Credit within the past 3 years) you need to notify HMRC that you intend to claim within 6 months of the end of the relevant accounting period. Second, you have to file an online Additional Information form. Third, the CT600L form and correct CT600 form need to be filed within 22 months of the end of the relevant accounting period.

The core of your question is whether designing jewelry is an advance in science or technology.

The actual wording in the HMRC Guidance is "An advance ... in a field of science or technology ..." The word "field" is important because you don't need to make in an advance in (say) material science as a whole. The "field" you can "advance" can be much narrower.

An interesting place to start is Google Scholar. A quick search of "jewelry technology" comes up with (for example) "The application of carving technique based on 3D printing digitalization technology in jewelry design". This project would likely qualify as R&D.

Please note that this is still a technological advance. There is still technological uncertainty. If your regular day-to-day job is to come up with new designs then, no matter how lovely these designs are, you are making a cosmetic improvement.

A good way of thinking about this is: After your potential R&D project is finished, have you learned something so that if you were to do the project again, it would be far easier, fewer false starts, less wasted effort?

I hope this helps. I personally have been claiming R&D tax credits for my startups for over 20 years, and have created a company, Claridian, to help other small companies claim R&D tax credits.

 

[Tables Force]

We applied for this and received enough of a tax credit to offset our corporation tax and it most definitely was not for an advance in technology. The company you use if they are good will help you with the wording of the claim to increase your chances of success.

So you're basically admitting you done tax fraud?

Or did you qualify for some other reason?

 

[Porky]

@CT1212
Read the other thread on this matter

IMO HMRC are clamping down so hard now on R&D they take the stance now of not paying claims as an automatic response. There would be a VERY high possibility that even if this firm got the cash over the line, within the next couple of years they could go back over paid claims reopen them and request the money back.

It’s already happening to many businesses at the moment and let’s face it the more this government squander your tax money on crap, they will want to rinse everyone else to pay for it, so expect further tax raids in this area for sure.

If you don’t think you qualify you shouldn’t claim it imo but if you do and it’s paid out, I would hold onto it in case they come knocking later., good luck

 

[Newchodge]

We do this and I have not been at all comfortable at times with a lot of the advice that our "advisors" have given to us. One of the leading national companies offering R&D claim assistance too. Telling us to in effect "beef up" our R&D costs beyond what we outline so that we get a bigger sum back and of course their cut goes up. We haven't done as they've said, namely because a) it is immoral and fraudulent and b), well, I just don't want the tax man at my door 5 years from now investigating and asking for tens of £k back + interest. Plenty of people have been caught out by HRMC for stuff done years ago. There are a lot of companies out there (so many spam calls we get now are R&D advisors) IMO that are poorly advising and I think a national scandal is brewing. It feels like a miss-selling scandal to me what with the sorts of clowns (mostly unscrupulous salespeople, not tax experts) now getting every man and his dog to bang claims in.

Our accountants also pre-warned me that HMRC are getting wise to it now as before they just used to rubber-stamp everything immediately, now more clients get queried. I wouldn't be surprised if they start investigating and clawing back when it gets exposed. It is fast approaching the point where I would be expecting the local chippie to tell me they're now started claiming r&d credits. I actually have a laboratory and employ a full time R&D person and a couple more supporting it as part of their roles and I look to rule out any activity (reverse formulating etc.) that isn't a genuine "advance" in the field. Which I think also annoys our advisors who seem to think our claim should be multiples of what it is.....Don't want to put you off, as I say we do it and we benefit from it (about £15k a year we get back) but I just want to make the point as a taxpayer too that I am getting pretty concerned about the value for money we're getting from this scheme, like the Covid bounceback loans incidentally, it is being roundly abused by poorly advised or willingly fraudulent companies that make zero advances to science or technology and yet take our tax money. It was obviously a scheme designed to help our country genuinely foster innovation (which it needs to) and I'll be mightily disappointed when it gets canned, as it will, because we've got nothing out of the tax breaks.

This is an old thread that was revived recently. Having re-read it I just wanted to thank and congratulate SillyBill for his prescience. And to ask his advice on the next Lottery numbers