Identifying eligible clients in Food & Drink

Something we hear time and again from our clients is that they struggle to identify clients in their client base who would be eligible to claim R&D tax relief. So, in a new blog series, we’ll be digging into some less obvious sectors and discussing what to look for when assessing eligibility!

In the second part of this series, we’re looking at food and drink manufacturing. As with our previous subject, agriculture, the level of eligible R&D to be found in this area is misunderstood. In fact, experts are often poles apart, with some stating that there’s no eligibility at all in food and drink, and others preparing claims for anything and everything!

As with most things, the answer is somewhere in the middle – some food and drink manufacturing can be carried out without ever doing eligible R&D, whereas other companies end up doing a huge amount of qualifying work.

What to avoid

As with agriculture, it’s worth taking the time to first think about the types of food and manufacturing companies that don’t do any eligible work. As a first pass, if you have clients in this sector that produce traditional foodstuffs, for example bread, using tried and tested techniques and without investing time and money in trying to improve their recipes or processes, they’re almost certainly not doing eligible work, so you can remove these from your list.

Beyond this, it’s worth thinking about the scale of the operation, and whether the work they are doing could be done easily in a domestic kitchen. For example, consider recipe development in restaurants – while they are potentially developing new and cutting-edge dishes, they’re unlikely to be doing anything that advances food science, and most of what they do could be done by a skilled home chef.

In fact, in food and drink manufacture, new product development doesn’t often qualify as eligible work, as most of the time the company can use existing knowledge and processes, with some tweaks, to produce and scale these products.

Another ineligible strand of work you often see in food and drink is companies diversifying and starting to produce a range of products that they’ve never offered before, but that are not new to the industry as a whole. Good examples of this might be breweries branching out into producing gin, or cake manufacturers moving into bread production – much as this might be new to the individual company, it’s not an advance to the industry as a whole.

Ok, so what should I look for?

So, now that we know what ineligible food and drink R&D work looks like, what areas should you be focussing on?

Responding to new legislative requirements

Within the food and drink industry, there is a huge amount of legislation that manufacturers are required to comply with, and that changes regularly. Even where there is no legislation, government advice and taxation regimes can affect food and drink manufacturers. For example, increased tax on products that are high in sugar has led to a huge amount of research into sugar alternatives and how to reduce sugar levels without detrimentally affecting the organoleptic properties of these products. Much of this work will have elements that are eligible for R&D tax relief.

Scaling and commercial production

As stated above, new recipe development doesn’t often involve making an advance in science or technology. However, scaling these recipes up to commercial production levels can be difficult, and often involves elements of eligible R&D. Companies that work to produce food and drink on a larger scale, especially where this hasn’t been achieved previously in the industry, are often doing eligible work.

Changes in fashion

As well as legislative changes, food and drink companies are required to respond to changes in consumer requirements. For example, the increase in people following vegan or plant-based lifestyles has led to a huge increase in the demand for vegan alternatives to standard products. Where this requires advances to be made in food science, for example in the production of convincing meat alternatives, you’re likely to find eligible work.

Supply Chain Companies

In common with agriculture, the supply chain to the food and drink industry can be where you are most likely to find eligible work. From engineering companies developing advanced food processing machinery to chemistry companies producing compliant food additives to comply with new legislation, this can be a very rich seam to tap.


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WhisperClaims’ take on the Research and Development Tax Credit Statistics 2020

It’s that time again—the Research and Development Tax Credit Statistics have been published, and my inner stats nerd is in full flow!

First of all, the standard points—use of the scheme continues to increase, with 17% more claims submitted in 2017-18 compared to 2016-17 and the amount of support given increasing to over £5.1bn, a 15% year-on-year increase. This is great news for UK companies, with more and more companies accessing support for their R&D activities—15,750 companies claimed for the first time in 2017-18, indicating that awareness of the scheme continues to grow every year.

However, none of that is really news—the trends have been stable for several years now, and the first page of HMRC’s report gives a great summary of these points. What I’m more interested in is using stats to attempt to form a more nuanced picture of the types of companies that are making claims.

We get a lot of questions from our users about how to identify eligible companies amongst their clients, and the easiest thing to do is paint them a picture of the most likely candidates. So, if I twist statistics a little to do my bidding, I could take the modal values from this year’s stats to describe the most common claimants. This means that I could tell our clients to look out for manufacturing companies in London that were formed less than five years ago, making claims of less that £5k tax benefit—that’s the most likely SME claimant according to the stats. However, this information doesn’t line up with my experience of making claims, and is probably not entirely helpful to any of our clients!

Right, how else can we do this? Well, rather than taking the mode, we could look at the median to get an idea of what an ’everyman’ claimant looks like. Under the SME scheme, our everyman claimant is a company of 15-20 years standing, operating in Arts, Entertainment and Recreation, based in Yorkshire and the Humber and making claims of £20-25k in tax benefit. They’re really quite different to our RDEC everyman, who are still based in Yorkshire and the Humber and 15-20 years old, but these companies work in Electricity, Gas, Steam and Air Conditioning and make claims of £30-40k. Hmm, this still doesn’t sound particularly like any clients I’ve ever worked with!

So, what’s the point of this, other than an excuse to spend an afternoon juggling numbers and spreadsheets? Really, it’s that you can’t rely on statistics and basic facts to identify eligible clients—if you do you’ll miss a huge number of opportunities. What’s always missing from any analysis like this is the personal touch—advisors that know their clients well can learn to spot eligibility in the unlikeliest of places, even if that’s the 15 companies registered in the Channels Islands, or the five working in Public Administration, Defence & Social Services that that made claims for SME R&D tax relief in 2018/19.

And this is what we’re all about at WhisperClaims—enabling our clients to put their in-depth information about their clients to good use in making strong, robust R&D claims. This helps strengthen their relationships with their clients, as well as boosting their bottom line—a win/win!

As part of this, we’re expanding our range of eligibility related content to help you more easily and accurately identify R&D. Our other articles and the WhisperClaims ebook cover the bulk of written information, while our webinars directly invite you into the conversation, person-to-person.

For more examples, visit our website and subscribe to our mailing list to stay updated on any new events and resources we have to share with you.

 


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Guest Post | Alan Woods: How to submit a claim for R&D tax relief

Here at WhisperClaims, we get many questions about what to do with the eligible expenditure figures that are contained within our reports, and how best to submit claims for R&D tax relief. Now, we’re not accountants, and as such we’re neither qualified nor allowed to offer that kind of advice. Happily, though, we do know some really good accountants with lots of experience of this kind of tax!

To help support accountants making R&D tax claims, we asked Alan Woods of Woods Squared to outline his process and answer some of the more common questions we get asked. Take it away, Alan!

What’s your process for claiming R&D tax relief?

Preparation and submission of an R&D tax relief claim is a five-step process for us:

  1. Calculate the eligible expenditure and prepare a supporting report
    We use WhisperClaims to help us prepare the supporting documents and calculate the eligible expenditure.
  2. Incorporate the R&D tax figures in the tax computations;
    This can be done using the R&D feature in your tax filing software. We enter the value of the expenditure and then run a draft computation. If this results in a tax liability, we check and finalise the tax computations and move on to step three. If it creates a loss, we assess how best to utilise this, and then tell the software whether we want to claim a tax credit or carry the losses forward or backwards before moving on.
  3. Include the claim in the CT600;
    Again, this is done semi-automatically by our tax filing software – we follow the steps in the software and then check that everything is correct. Whichever software you use, you’ll be able to find instructions on how to do this in the help and support section.
  4. Attach the supporting documents and submit the CT600;
    Once we’re happy with the CT600, we attach any supporting documentation and send it off to HMRC.
  5. Wait for payment!

How should I submit the supporting documentation?

While there are several ways to submit the documents, including emailing them directly to HMRC, we simply attach them to the CT600 submission via our tax filing software. We aim to include R&D on original submission if at all possible, so with these we’ll attach the accounts and the supporting documents. Where we have to amend the CT600, we just attach the supporting documents to the amended submission – you don’t need to reattach the accounts at this stage.

The main advantage of this for us is that we get an electronic acknowledgement of submission from HMRC and can be sure that the documents won’t get lost or incorrectly assigned!

Do I need to chase HMRC about claims?

At the moment, HMRC are paying out claims fairly quickly – we’ve had a few recently that have been paid out within a week, and most are paid out within 20-28 days. The only claims we find we have to chase HMRC about are those where we’ve carried losses backwards – these tend to take a lot longer and often need a push.

Quick tip – we prefer chatting to HMRC through their webchat feature. You tend to get a quick response, and, more importantly, you can print off and save the transcript at the end for audit purposes.

Does HMRC pay interest on tax rebates created by R&D tax claims?

Yes! As with any situation where a company has overpaid tax, HMRC will pay interest at the official rate on any repayments of tax due after the submission of an R&D tax claim.

Can I do the submission without tax filing software?

Yes, but it’s a little more difficult. HMRC have provided a step-by-step guide on how to include R&D costs in a CT600, which guides you through the whole process. You can also use HMRC’s online tools.

 


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Identifying eligible clients in Farming and Agriculture

Something we hear time and again from our clients is that they struggle to identify clients in their client base who would be eligible to claim R&D tax relief. So, in a new blog series, we’ll be digging into some less obvious sectors and discussing what to look for when assessing eligibility!

To kick this off, we’re looking at agriculture and farming. These are industries where most people wouldn’t expect to find cutting-edge R&D, and to some extent they’re right – the majority of farms aren’t doing qualifying work. However, if you know what to look for, this can be a rich seam to mine.

What to avoid

Having said that, it’s worth taking the time to think about what a non-eligible farming or agriculture business looks like. Farming and agriculture businesses that produce food using established techniques, without any attempt to improve through technical or scientific means, are definitely out!

Beyond this, it gets a little more difficult. A lots of crop farmers, for example, buy in new seeds from their supplier and have to spend time optimising the types and levels of irrigation and fertilisation to maximise their crop yields. Although this type of work can be difficult and expensive, it’s unlikely to be eligible because any knowledge gained would be a company-specific rather than industry-wide advance in science or technology. The same goes for the introduction of new technology, such as crop-inspection drones. Using off-the-shelf technology for the purpose for which it is designed does not qualify as eligible work. 

Ok, so what should I look for?

So, now that we know what ineligible farming work looks like, what areas should you be focussing on?

Collaborative projects

Developers of new agricultural technology will often partner with larger agricultural organisations to gain knowledge and enable more rigorous testing. If you know that your agricultural client is working on collaborative projects with technology companies, they’re likely to have an eligible claim, and are definitely worth targeting!

Larger Companies or Co-operatives

As we’ve established, smaller individual farms are less unlikely to be carrying out eligible work. However, as the farming companies get bigger, or form part of co-operatives, you’re far more likely to find eligible work. For example, these types of organisations will often have the skills and funding necessary to embark on in-house breeding programmes, or develop technologically advanced processing techniques and machinery, that would constitute an industry-wide advance. 

Environmental Improvements

Hot topics in farming at the moment centre around environmental sustainability, such as improvements in disease and pest control, increased water efficiency, improved soil management and working to meet new regulatory requirements. Farming clients working in these areas are more likely to have qualifying work, as long as they are seeking to advance the industry as a whole. 

Supply Chain Companies

Saving the best for last, our top tip when looking for R&D in farming and agricultural is to focus on the supply chain to the industry. Whether it’s makers of agricultural machinery, plant and animal breeders or even producers of medications and supplements for livestock, these companies are far more likely to be doing cutting-edge, eligible R&D than individual farms. For example, we stated above that introducing drone technology to a farm would not be eligible for R&D tax relief, which is true. However, developing improved drones, or writing advanced software programmes to enable the assessment of crop health and yield from the air would absolutely involve eligible R&D. 

 


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Update: Furloughed workers and R&D tax relief

Earlier this month, HMRC published guidance on how the Coronavirus Job Retention Scheme (CJRS) or furloughed workers scheme, would be treated for the purposes of R&D tax relief. The good news for us is that the advice we’ve been giving our clients and had published way back in July was right! This advice is reproduced below, but the key takeaway is that HMRC will not consider furloughed workers to have been directly or actively engaged in R&D during the time they were on furlough, and so this time, and the furlough payments, will have to be excluded from future R&D claims.

As a reminder, the CJRS was launched in March 2020, and forms the cornerstone of the Government’s support to businesses during the Covid-19 crisis. It originally enabled employers to furlough employees and claim back 80% of the salary costs of these workers from the Government. Version two of the scheme came into force in July 2020, and allows previously furloughed employees to return to work part-time, with the Government continuing to fund to portion of time these employees are not in work.

This scheme has been well received and widely utilised, but, based on HMRC’s recently published guidance, how will the furlough scheme affect a claim for R&D tax relief?

The good news is that the furlough payments are not classified as State Aid, so won’t directly affect the ability of a company to claim SME R&D tax relief. Employees who are furloughed are also not allowed to work, so by definition cannot be doing R&D for the time that a claim is made under the CJRS.

However, what the furlough payments will do is make it a lot more complicated to calculate staff apportionments for R&D tax relief claims. To illustrate this, we’ll work through the case of Bob, a laboratory technician. He works in the R&D team at company A, and spends 80% of his time on eligible activities. He was furloughed from 1st March 2020 to 30th June 2020, and has now been asked to return to work two days a week from 1st July 2020 to 30th September. From this point he expects to return to full time work.

So, how would we work out Bob’s overall R&D apportionment for the financial year Jan-Dec 2020? Let’s look at how he will have spent his time:

  • Five months full-time work
  • Four months completely furloughed
  • Three months working 40% and furloughed 60%

Overall, Bob will spend 6.2 months, or 52% of the year at work. Of this time, 80% is eligible R&D, so his overall apportionment would be 42%. Phew!

This kind of calculation is going to be needed for thousands of workers across thousands of R&D claims over the next year or so, so we’d recommend preparing yourself and your clients now! It’s also important to realise that any company that furloughed their R&D staff, or reduced their spend on R&D as a response to the crisis will see a proportional reduction in the size of their R&D tax relief benefit, so expectation management will be key to happy clients and accurate claims.


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Basics of RDEC (Research and Development Expenditure Credit Scheme)

Much of what you’ll read online about R&D tax relief focuses on the SME R&D tax relief scheme, with advice about how to claim, what the benefits are and what kinds of companies can make a claim. This can mean it’s more difficult to find advice and guidance about the RDEC scheme. Here, we give you a basic starter for ten – what is the scheme, who can claim, and what are the main differences between the two schemes!

What is RDEC?

Just like the SME R&D tax relief scheme, the RDEC scheme is a UK Government tax incentive aimed at rewarding companies who undertake research and development, and was introduced in 2016 as a replacement for the Large Company R&D tax relief scheme. It is primarily designed for large companies, that is those with 500 employees or more, or that breach the limits of turnover and balance sheet assets.

As of 2018, the most recent year for which R&D stats are available, only 13% of claims for R&D tax relief were made through the RDEC scheme. However, these claims represented a whopping 48% of the value of total R&D tax relief, with the average RDEC claimant receiving over £300,000 in tax benefit. Even for larger companies, that saving is not to be sniffed at!

How does RDEC work?

RDEC is a pretty straightforward tax relief, especially when compared to the SME scheme. Basically:

  • The RDEC tax credit is equal to 13% of a company’s eligible R&D expenditure
  • The credit is taxable at the Corporation tax rate, so the overall tax benefit is equal to just over 10.5% of qualifying expenditure
  • The credit can be shown ‘above the line’, so is visible as income in the claimant’s accounts

The eligibility criteria, including the definition of a project and what constitutes eligible work are exactly the same for RDEC as for the SME scheme.

As for the qualifying expenditure, there are a couple of key differences. Just like in the SME scheme, under the RDEC scheme a company can claim for:

  • Staff costs, including pensions and bonuses
  • Externally provided worker costs
  • Utilities costs
  • Software costs
  • Raw materials costs
  • Payments to clinical trial volunteers

However, the rules for subcontractor payments and independent research are very different:

  • For subcontractors, only payments made to certain qualifying bodies, individuals or partnerships of individuals can be included in the claim. Payments to any other type of subcontractor, including limited companies, are not allowable.
  • Large companies can also include contributions to independent research, as long as they are made to qualifying bodies, individuals or partnerships of individuals can be included in the claim.

Can SMEs claim RDEC?

In two very specific situations, yes! SMEs can claim RDEC if:

  • They have received grant funding for their R&D. In this situation, some or all of the costs will have to be routed through RDEC, depending on the type of grant received.
  • They have carried out subcontracted R&D on behalf of a Large Company. In this situation, all of the costs of the subcontracted projects have to be routed through RDEC.

The main thing to remember when claiming RDEC relief for an SME is that you must comply with the rules of the RDEC scheme by excluding certain types of subcontractor costs.

How will my client receive their credit?

Once a company has calculated its eligible expenditure, there are seven steps to claiming the tax benefit. The detail of these can be found in CTA 2009 Chapter 6A s.104N and 104O and CIRD89780. In brief, the claimant company must:

  1. Discharge any corporation tax liability for the accounting period.
  2. Adjust to reduce net of tax amount
  3. Restrict to PAYE/NIC of R&D staff
  4. Discharge any corporation tax liability for other accounting periods
  5. Surrender for group relief
  6. Offset against any other tax liabilities
  7. Remaining balance paid to the company

Can I use WhisperClaims to prepare RDEC claims?

Yes! The system has been designed to prepare claims for both schemes, and combined claims where some of the costs go through RDEC and the rest through the SME scheme. There is also a section that helps you assess whether your client is an SME for R&D tax purposes, ensuring that all claims and companies are routed correctly.


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Why don’t start-ups claim R&D tax relief?

R&D tax relief should be a no-brainer for tech start-ups – they’re usually doing loads of innovative R&D, have eligibility up to the eyeballs and, by definition, are always on the look-out for funding! So why is the up-take of R&D tax relief so low amongst these companies?

During our time in the R&D tax relief world we’ve observed that there are three very common reasons for start-ups not to claim, and none of them are that they are unaware of the scheme!

They’re too busy

they're too busy to prepare R&D tax claims image

Now, we know that busyness is probably the most common reason given by any company to avoid working on their R&D tax claim, but this is especially true for start-ups. Most founders are busy trying to find funding, develop their product, sell the product and grow their team, all whilst being unsure whether the business will even exist in three months – it’s exhausting!

For a founder to take time out of their schedule to work on an R&D tax claim they have to be completely convinced that it’ll be worth their time, which leads on to our next two points.

They’ve had grants and other funding

they've had grands and other funding image

Even now, a lot of companies (and even R&D tax providers!) think that you can’t claim R&D tax relief if you’ve received grants and other funding. This belief is especially widespread amongst start-up founders, which is unfortunate given that they are also more likely to have received grant funding!

Of course, while having received funding doesn’t prevent a company claiming R&D tax relief, it does affect the tax benefit that they can expect to receive. If a start-up founder only has one project with low costs that has been grant funded, only getting RDEC relief might not be worth their time and effort.

They don’t have enough eligible costs

they don't have enough eligible costs image

This can be the killer reason for start-ups not claiming R&D tax relief. In the early days, founder/directors are often completely unpaid or on very low salaries. In the absence of other staff salaries or significant raw materials or subcontractor costs, this can be a complete blocker to making a claim. Furthermore, as start-ups begin to become profitable, founders often decide to pay themselves through dividends, which can keep the eligible expenditure below a feasible level for making a claim.

What can I do for my start-up clients?
helping your clients image

Helping your start-up clients understand the best ways to fund their business and the implications of funding decisions, can be invaluable to their success. For example, being able to advise on the tipping point where taking a grant can actually cost a company money in the long term could help prevent your client taking on the burden of an inadvisable grant. In the same vein, looking at the tax affairs of a start-up holistically could highlight whether taking a salary or dividends is better in the long run.


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New Product Development and the R&D tax relief scheme

Within the world of R&D tax relief, there can be some confusion about what constitutes eligible work. While we’ve covered the basics before, we thought we should go into more detail about one of the thornier aspects of this: what’s the difference between New Product Development (NPD) and eligible R&D, and can NPD ever be eligible?

What is NPD?

While R&D and NPD can often be used interchangeably, there are some distinct differences between the two. New Product Development is the entire process of developing a new product, from initial market research, through design, development, manufacture, marketing, all the way to sales. It can be the creation of an entirely new product or a process to update an older product.

R&D, on the other hand, is the act of creating entirely new science, technology or technical knowledge and developing that into a saleable product. It often, but not always, constitutes the development phase of NPD. From HMRC’s point of view, only the part of R&D that involves seeking an advance in science or technology and overcoming technical uncertainty is eligible for R&D tax relief.

Can you have NPD without eligible R&D?

Yes! In fact, this is often the case. Much NPD involves tweaking or updating existing products, which can be done without any R&D whatsoever. You also see a lot of NPD that does require some R&D, but this R&D isn’t eligible. This is usually where the R&D doesn’t seek an advance or doesn’t involve significant technical challenge.

So, is NPD ever eligible for R&D tax relief?

Is NPD part of R&D?

The entire process of NPD is not eligible for R&D tax relief. However, within NPD, there could be eligible R&D, as long as this R&D meets HMRC’s eligibility criteria. The key thing when claiming for NPD projects is to focus in on the eligible elements and ensure that no costs are captured from any other phase of the project.

Can you give me some examples?

R&D, baking recipes

A great example of non-eligible NPD would be the case of a bakery switching from making cakes to making bread. Bread-making is an established science, and all of the information needed to do this is in the public domain. This means that, although bread is a new product for the bakery, there’s no eligible R&D.

R&D, window-making

Another example of NPD without eligible R&D is where the aesthetic appearance of an existing product is changed without the need for any underlying technical change. This would apply, for example, to new window designs that use established production techniques.R&D, mobile devices

Mobile phone development is a good example of NPD with elements of eligible work. Each time Apple goes through a NPD process and releases a new iPhone, it’s likely that some eligible R&D will have taken place. However, only a fraction of the cost of NPD would be eligible and would reflect how much cutting-edge technology was developed to make the new iPhone possible.

Robot Illustration

At the extreme end, new products release in cutting-edge industries, such as robotics, are likely to have involved intensive R&D efforts, and, especially where prototypes or first-in-class items have been produced, a large proportion of the NPD cost is likely to be eligible for R&D tax relief.

As with all R&D claims, the key is to stay focussed, and help your client to focus, on the underlying advances in science or technology that made the NPD possible. Ask about failures, costs overruns, prototypes and technical challenges – if they can tell you about any of these it’s likely that eligible R&D has taken place!


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Can I help my clients get their R&D tax relief sooner?

Companies are always keen to improve cashflow, and R&D tax relief can be a great way to do this – they can either bring cash in as a tax credit or reduce their tax bills. For companies struggling in the current economic climate the timing of this can be crucial, so here are our tips to making sure that your client gets their benefit as soon as possible!

Has the claim already been submitted to HMRC?

HMRC Claim SubmissionIf the claim is already with HMRC, there’s very little you can do – the claim will be processed when the claim is processed and that’s that!

Has the client’s year end passed?

Has the client's date passed?

If the client’s year-end has passed, you’ve got an opportunity to get the claim in quickly! This does, of course, depend on your client cooperating and getting all of their financial year end information to you. Informing them of the size of their potential tax benefit could be a way to incentivise them to move faster, as can making sure your R&D claim process is quick and easy for both you and your client.

Is the client part-way through their financial year?

If your client is still part-way through their financial year, you’ve got a great opportunity to make sure that they get their money faster once they hit their year-end. Encouraging your client to keep clear records about the projects they have undertaken during the claim year, alongside details of money spent on R&D, can substantially reduce the time needed to prepare a claim. You can even go as far as advising them on how to set up their financial reporting and cost codes to make this as simple as possible come year end.

Changing end-of-year for tax

However, if your client is still six months away from their year end and desperate for cash, no amount of advance claim preparation is going to help them. This is where you can deploy the final weapon in your armoury – a change of financial year end. If you know that they’ve racked up significant R&D costs over the financial year so far, it could be advantageous for them to shorten their financial claim year and make a claim now rather than waiting for months!

Of course, it’s always better to do a little of everything – make sure you have a slick and robust process for preparing claims and taking the time to make sure your clients have the processes in place to properly record their projects and spending will be beneficial to all, no matter what the economy gets up to.


Brush up on the fundamentals of the R&D tax relief scheme

Streamline your claims processes and get expert advice on the R&D tax relief scheme.

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Should my client surrender losses for an R&D tax credit?

Advising your client on how best to utilise the tax benefit from an R&D tax relief claim can be complicated, especially when it comes to surrendering losses for a tax credit. Here’s our quick guide on what you need to consider.

What is an R&D tax credit?

Put simply, an R&D tax credit is a cash payment given by HMRC to loss-making companies that surrender losses generated by the R&D claim rather than carrying the losses forward to future tax years. Guidance on how to calculate a tax credit is given here, but essentially a company calculates the amount of losses they can surrender and is then given 14.5% of this amount back in cash.

Why not take the cash?

Why not take the cash?

For a loss-making company, the relatively quick and easy injection of cash received through an R&D tax credit can be a no-brainer – why on earth would they choose anything else? However, there are a few things to consider before committing to taking the cash:

Could the company carry the loss back?

Could the company carry the back the loss?

If the company made a profit and paid corporation tax in the previous tax year, it might be better for them to carry the loss back and get a rebate on tax already paid.

Is the company part of a group?

Is the company part of a group?

If the company is part of a group and another member of the group is in profit and likely to have a large corporation tax bill, it could be that using group relief rules to surrender the losses to the profitable company is more beneficial.

Is the company likely to make large profits in the near future?

Is the company likely to make large profits in the near future?
If the company knows that it is likely to make a large profit in the following tax year, carrying the losses forward to reduce future tax bills could be the best course of action.

However, if the answer to all of the questions above is no, then it’s likely that the company would benefit most from taking the R&D tax credit and enjoying the cash boost!

 

What’s the difference in benefit?

So, what does this all mean in terms of actual difference in tax benefit? Well, this depends on both the profit/loss position of the company, and whether the losses can be used as above.

Imagine Company A has £100,000 of eligible expenditure. How would its tax benefit differ for different profit/loss positions and for the scenarios given above?

Table of an example of different profit/loss positions

*Remember than in this scenario, the company has already had a tax benefit of £9,500 by reducing their taxable profits to £0.

Looking at the table above, it again seems like a no brainer to always carry the losses forward or back or utilise group relief. However, if a company is deciding between carrying losses forward or taking the tax credit, there’s one more thing to consider – would a smaller amount of cash now be worth more than a slightly larger amount of cash in the future?

Consider a fast growing start-up company investing their tax credit in more R&D, for which they expect an internal rate of return of 50%. In the first scenario above, the £11,600 tax credit is worth £17,400 in a year’s time, significantly more than the benefit of carrying the losses forward!


Brush up on the fundamentals of the R&D tax relief scheme

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Avoiding HMRC enquiries

An HMRC enquiry is simply the process by which HMRC ask questions or seek clarification on certain aspects of an R&D tax relief claim. It can be triggered by something in the claim itself, or may be part of wider reviews or spot-checks that HMRC carry out to assess their own processes.

Can you avoid enquiries?

Short answer: no.

Long answer: Still no. HMRC reviews every tax return and R&D tax claim to some extent, and will always choose a certain proportion for more in-depth reviews. They also enquire into R&D tax claims as part of a wider review of a company’s tax affairs, so there’s no fool-proof way of completely avoiding enquiries. Having said that, you can do a lot to keep the risk of enquiry at the baseline level. Badly put-together claims are always at a higher risk of being enquired into, especially if they contain certain triggers.

What can trigger an enquiry? 

Over our years of working in the world of R&D tax, we noticed there were a handful of things that hugely increase the risk of an enquiry:

  • Changes in claim size: Companies with a history of making claims of a certain size can find themselves facing an enquiry if the claim suddenly jumps in size. It can suggest to HMRC that the claim has been overstated, especially if there hasn’t been a similar increase in turnover or staff numbers.
  • Disproportionate claim size: Claims where the eligible expenditure is a large proportion of the turnover can look a bit wonky to HMRC. This is particularly true for manufacturing and food production companies, where HMRC would expect the vast majority of staff time and resources to be devoted to business as usual.
  • Claims from unexpected sectors: Claims made by companies that operate in sectors that would not traditionally be associated with R&D can raise eyebrows. This is especially acute for non-tech companies that have carried out software related projects.
  • Lack of alignment with accounts: It’s really important that the costs included in an R&D claim align with the published accounts for the claim period. If, for example, grants are listed in the accounts but this is not reflected in the R&D claim, this can trigger questions about whether the grants were used for R&D.
  • Doesn’t look like R&D: If HMRC read the technical narrative and can’t understand what R&D was undertaken or how it fits with the requirements of the scheme, they’ll have a lot of questions!

How do I reduce the risk?

The good news is that it’s usually easy to avoid these triggers, or mitigate the risks they introduce. First and foremost having consistent, reliable processes for pulling together R&D claims is key. This makes sure that nothing is missed and there’s a good audit trail of why certain projects and costs were included.

Once you’ve got the process worked out, it’s vital that it is well documented by the technical narrative. Ensuring that all of HMRC’s questions are answered without including any irrelevant information is key. For more information on how to write a good technical narrative read this article.

Finally, there will always be eligible claims that contain triggers that can’t be removed, so it’s important to mitigate them as much as possible. For example, if a company’s claim has quadrupled from one year to the next, include a sentence or two in the technical narrative explaining this increase. It’s good to acknowledge to HMRC that a claim might look unusual and answer any specific questions they might ask about this before they ask them.

How worried should I be about enquiries?

HMRC don’t publish statistics about enquiry rates for R&D tax claims, but we know from our own data and that of other providers that 0.5-2% of claims are enquired into. Even then, as long as you’re confident that the claims that you submit are robust and compliant, an enquiry is no reason to panic. In fact, we find that they can be a great opportunity to have a conversation with HMRC about their current interpretation of the guidance and how they like to see claims presented.

How does the WhisperClaims app help?

If you are currently using the WhisperClaims app, or thinking about it, here’s a quick recap of the features that will steer you in the right direction when it comes to preparing robust, HMRC-friendly claims through our platform.

  • A robust question-set: our questions poke into each corner of the legislation meaning you won’t forget to include important information in your client’s claim.
  • Consistent, reliable process: the app offers you a very structured and repeatable claims preparation process.
  • Clear indicators of eligibility: you’re faced with end points during the claims preparation process if your client’s project details do not meet the eligible criteria.
  • Objective decision making: the app provides you with an objective decision making tool, rather than relying on your subjectivity on whether a client may or may not be eligible.
  • Screen out borderline cases: you can use the tool to screen for borderline cases and avoid wasting time pursuing claims that may not be eligible.

Looking to create an HMRC-friendly R&D claims preparation processes?

Our ebook is loaded with helpful tips on how to streamline your claims processes and offers expert guidance on the R&D tax relief scheme. Download your copy.

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What should an R&D technical narrative include?

The aim of a technical narrative should be to convince HMRC that the claim is valid and answer any questions they might have about the claim, without raising any red flags

The narrative should briefly cover the key points that HMRC are interested in:

  • Which areas of science or technology was the company operating in?
  • What technical advances did the company seek to make during the claim period?
  • What technical difficulties did it meet along the way?
  • Did the company use competent professionals to carry out the work?

Once you’ve covered these four points, you’re most of the way there!

Best practice

Stick to the technical facts! HMRC don’t really care about the commercial aspects of the projects, so stick to talking about the underlying technology.

Keep it short! The best technical narratives tell HMRC exactly what they need to know and no more. The longer the report, the information HMRC have to ask questions about, and the more likely you’ll include irrelevant or commercial facts and figures.

Link to the costs. It’s always best to include some mention of how your technical narrative links to the costs included in your CT600 so that HMRC can see how the two hang together.

Leave no stone unturned… Having said that it’s best to keep the technical narrative short, we’d recommend including short, factual statements to demonstrate to HMRC that the claim has been thoroughly analysed and well put together. For example, even if a company didn’t receive any grants during the claim period, it’s still good practice to state that this is the case, indicating to HMRC that you understand the guidance and what is required.

What not to do

Include lots of padding. HMRC aren’t concerned about the qualifications of the person pulling the claim together, or reading long descriptions of the history and financial successes of the claimant company. In fact, including too much irrelevant information could make it look like you’re trying to hide something!

Focus on the commercials. As stated above, the technical narrative should be a technical narrative. Don’t include any information about the commercial aspects of the claimant company’s business unless it is directly relevant to the claim. Including too much of this kind of information can confuse the narrative and could lead HMRC to conclude that ineligible commercial costs have been included in the claim.

Blind the reader with science. Remember that you’re writing your report for an HMRC inspector who is unlikely to be an expert in the relevant field of science or technology. Make sure that the report is written in clear, easy to understand language, and avoid using too many technical terms or jargon. This way, the inspector can understand exactly why the claim is eligible without having to ask for expert help.

How does WhisperClaims help with technical narrative?

When we designed the WhisperClaims app, we started by thinking about the ideal technical narrative. We thought about what questions it would need to answer, and what it would need to cover, and then we sat down and wrote it. It wasn’t until we’d perfected the report that we started building the app!

These days, every report produced by the WhisperClaims app is a descendant of that first, ideal report. Using WhisperClaims to produce your technical narratives makes sure that all reports are robust and consistent, and directly linked to the costs that you have entered.


Brush up on your R&D claims knowledge

Our ‘Accountants’ Guide to Preparing R&D Tax Claims’ offers helpful advice on the fundamentals of the R&D tax scheme. Get your free eBook today. WhisperClaims ebook

The art of preparing R&D tax claims while working remotely

As we all adjusted to the current normal and get settled into working from home, I saw a lot of posts and blogs where people shared their beautiful home working set-ups. They had actual desks! And plants! Now, here at WhisperClaims we pride ourselves on our honesty, and I can honestly say that my home working set-up does not involve a desk of any kind. In fact, my workstation has become ‘wherever I can see the children and still type effectively!’

To illustrate this point, I thought I’d give you an insight into how I prepared WhisperClaims’ FY2020 R&D tax claim:

Day 1:

Goal: Set up my R&D claim from the sofa; Feed the kids!

5:00pm, on the sofa: Suddenly realise that the kids are quiet, and I have twenty minutes until I need to start cooking dinner.

Quickly sign in to WhisperClaims and set up our FY2020 claim.

Day 2:

Goal: Prepare an R&D claims report; Escape childcare carnage!

9:00am, in the garden: PE with Joe.

9:30am, at the kitchen table: Gasp for air. Catch up with the team over Zoom.

10:00am, at the kitchen table: Attempt to start filling out the R&D claim question set.

Image of jen badger at whisperclaims
10:03am: The bickering starts.

10:04am: Throw snacks into the living room.

10:10am: Realise the snacks are not enough. Gather broomsticks, blankets, doll, doll’s pushchair, frisbee, laptop and chair and head down to the garden.

10:15am-11:15am, in the garden: Sit shivering in garden wearing winter coat, hat and gloves. Fill out technical questions. Pull salary details from Xero and enter into the app.

11:15am – 11:30am, in the garden: The bickering starts again. Put laptop down and arrange timed laps of the lawn.

11:30am: Give up. Heave all of the stuff back into our second floor flat.

11:45 – 12:00, on the sofa: Sit awkwardly with a child on either side of me watching cartoons. Enter and apportion the rest of the R&D costs.

image of jen badger of WhisperClaims
12:00pm – 12:30pm, in the kitchen: Feed the ravenous hordes.

12:30pm – 1:00pm: Rare moment of peace while kids do crafts. Make space in amongst the chaos of craft materials on the coffee table for my laptop. Check through R&D claim, finalise and download report. Email to accountant while the going is good….

And that, my friends, was that. Half a day, two and a quarter hours of actual work, two happy-ish children and a complete R&D claim sent to our accountant – not bad at all!


Have you had your WhisperClaims demo yet?

Our fully automated, cloud-based software is capable of producing all the documentation needed to support an R&D claim – no matter where you’re located!

Image of a laptop showing the R&D tax software with a question about what areas of science and technology a in which company undertook R&D

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Avoiding red flags & common mistakes

From time to time, before switching to WhisperClaims, Accountants often approach us looking for a second opinion on R&D claims reports prepared either by themselves or another provider. It’s a good way for them to get a second opinion, which helps to mitigate against HMRC enquiries, and, it keeps us current on how the guidance is being interpreted by the industry. All very positive!

Every now and again we do come across a report that makes us wince! There are some common mistakes that we thought we’d pull together and share with you – these are major misinterpretations of the guidelines that we recommend you avoid!

1. Confusing commercial details with technical and scientific details.

A report we recently reviewed had a whole section dedicated to establishing the technical baseline for the client’s projects, which is exactly what HMRC like to see. However, this section was full of commercial details about the company and the industry, and actually undermined the claim from the beginning by establishing that the company did standard work using off-the-shelf components, which is completely ineligible!

2. Assuming that trial and error is eligible.

Reports that use the phrase ‘trial and error’ multiple times to describe the work that the company does to establish which combination of components perform best for each application, can be a problem. Trial and error is almost always ineligible. To quote CIRD81900, ‘improvements, optimisations and fine-tuning which do not materially affect the underlying science or technology do not constitute work to resolve scientific or technological uncertainty’.

3. Claiming for software installation and optimisation.

This point is more common than you might imagine – an example being a company that has decided to upgrade their CRM system and claimed work as R&D. A report we recently reviewed detailed the analysis they did of available systems before making the choice to go with an off the shelf system. If they’d done this work and then discovered that there was no available system that was technically capable of doing what they needed, they might have had a claim, but installing and optimising a standard system is not an advance in worldwide science or technology. Again, CIRD81900 states, ‘A process, material, device, product or service will not be appreciably improved if it simply brings a company into line with overall knowledge or capability in science or technology, even though it may be completely new to the company or the company’s trade.

4. Confusing commercial and technological uncertainties

Reports that list a number of ‘technical uncertainties’ including uncertainty regarding whether a project could be completed within the allocated budget. This is absolutely not a technical uncertainty by HMRC’s definition – ‘Scientific or technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field.’

5. Using ‘Red Flag’ words

Red flag words used throughout a report, including ‘fine-tuning’, ‘trial and error’, ‘optimisation’ and ‘bespoke’. The quote in section two (above) explains why the first three of these should be avoided. ‘Bespoke’ is one we’ve learned is a red flag from our experience of claims and conversations with HMRC – it implies that the work done is specific to the company and doesn’t constitute a worldwide advance in science and technology.

The key thing to remember is that these issues are easily avoidable if you take the time to get to know HMRC’s guidelines, and make sure that your reports are produced by either people or systems that know what they’re doing. Here at WhisperClaims we put a lot of time and effort into making sure that our reports are robust, accurate and compliant with HMRC’s guidelines!

If you’re not already a WhisperClaims subscriber and want to explore our system or get a second opinion on how you are currently preparing claims, please feel free to get in touch. We’re happy to help!

How to remotely prepare R&D tax claims

In these days of increased digitisation, working from home and generally more spread out teams and working practices, it can be difficult to pin down a time when all relevant people are available to meet face to face. In the case of preparing an R&D tax claim, this can be particularly acute given the need for senior members of the management team to be in attendance.

Happily, there are a plethora of specific and less specific digital tools you can take advantage of to make sure that you can remotely deliver the great R&D tax claim service that your clients expect. Here’s our guide on how WhisperClaims can help you to get the best out of your tools and clients and make sure you prepare accurate and robust R&D claims remotely.

Video calling

Tools like Zoom and Skype have made it very easy to have ‘face to face’ meetings from anywhere! In preparing R&D tax claims, this enables you to talk through all of the work done in the claim period and gather as much information as possible in one go. It’s usually possible to record these calls too, so you won’t forget anything that you were told! However, there are some downsides. It’s easy to forget to ask key questions, and it can be difficult to verbally gather accurate information on costs. To mitigate this, you can have the WhisperClaims claim open in the background and enter the information as you go along, but this can lead to a more stilted conversation as you read out all of the options to your client!

Screen share

Rather than read out the questions or risk missing vital information, many of our clients opt to share screens through tools like Zoom. Working this way your client can see the WhisperClaims question set and can give you the exact information you need, while you retain control of the software and enter the answers yourself. This is how we do a lot of our training and demonstration calls, and it can be a great way to gather information. However, it can mean taking up a chunk of yours and your client’s time, and you can only complete as much information as your client has available on the call.

Collaboration

Many of our users prepare R&D tax claims remotely using our collaboration feature. This allows them to invite clients to directly access the system by themselves and answer the technical and costs questions in their own time, saving huge amounts of time. Their answers can then be reviewed remotely, checking that everything they have entered is accurate and in line with the scheme guidelines before downloading the report.

Our users have used this methodology to drive complexity and time out of existing processes, or simply to avoid losing control over the claim by outsourcing to specialists. It’s a win-win for them and their clients as it means an efficient, cost effective service that allows the client to get best value access to this increasingly important tax relief.

Of course, in reality our clients use a combination of all of these methods to deliver the best and most appropriate service to their clients!

However you decide to use WhisperClaims, we’re here to give you support, advice and training to make sure you’re using the app in the best possible way.

Is it better to take a grant or rely on R&D tax relief to help fund R&D?

We’ve written before about how grants can affect a claim for R&D, but even knowing this, it can still be tricky to work out whether it’s better to take a grant or rely on R&D tax relief to help fund R&D. It’s a tricky decision to make, but considering the following points should make it easier!

Cashflow

Grants are usually paid out in arrears, often on a quarterly basis. From a cashflow point of view, this means that a grant holder will see the benefit far closer to when the money is spent than with R&D tax relief. Depending on how quickly a company can pull together their accounts, R&D tax claim, tax comps and CT600 form, it can be over a year between spending money on R&D and seeing any tax benefit.

Another point to remember is that grants are often paid out in cold, hard cash, whereas R&D tax relief is often realised as a reduction in tax payable. Where this is usually of huge benefit to the company in the long term, it doesn’t offer the immediate positive effect on cashflow of a grant.

Reporting

A claim for R&D tax relief has no mandatory reporting requirements. All a claimant needs to produce is a technical justification and a calculation of eligible expenditure once a year, and they’re done!

On the other hand, grant reporting can be time-consuming, lengthy and repetitive. Grant holders are usually required to submit details of expenses, milestones and project outcomes regularly during the lifetime of the grant, and even beyond this.

Where’s the tipping point?

Overall though, it’s usually best to both claim R&D tax relief and as many grants as possible to maximise R&D funding. However, it is important to know where the tipping point is, when taking the grant it will mean that the company is worse off overall. It’s a fairly complex calculation, but really only requires knowledge of the type and size of the grant and the expected spend on R&D.

Here’s a quick chart to show how grants affect the benefit received by a profitable company with an eligible R&D spend of £150,000. As an SME, this company would receive approximately £37,000 in R&D tax relief if they didn’t receive any grant funding.

a chart showing how grants affect the benefit received by a profitable company with an eligible R&D spend of £150,000

First thing to note is that a company should always take a ‘de minimis’ grant if possible – a company receiving this type of grant and claiming R&D tax credits will always be better off. That’s because it’s only the amount of the grant that has to be claimed through RDEC, and all of the rest of the cost can be claimed through the SME scheme.

Second thing to note is that it’s a little more complicated when it comes to state aid grants. These grants push the whole project cost into the RDEC scheme for R&D tax, so taking a small grant can mean being worse off overall. For our example company, a grant of less than about £22,000 would actually cost them money, as they’d get a better return from just claiming R&D tax relief.

Conclusion

So, what does this all mean to an advisor? Well, the key thing is to make sure that you know what grants your client is thinking of applying for so that you can advise them on how this will affect their cashflow and overall benefits. The good news is WhisperClaims is set up to deal with all types of grants and make sure that the correct amounts of expenditure are routed through the SME and RDEC schemes, meaning that you can rest assured that your client’s claims are robust and defensible.

7 ways to successfully embed R&D software into your firm

So, your company has taken the plunge and signed up to trial WhisperClaims to prepare your R&D tax claims, and you’re raring to go! 

Your next step is to get the rest of your firm onboard. Well, while we won’t pretend to be experts on change management, we’ve pulled together this quick guide to help make your job easier. 

1. Mind the gap

How does your company currently handle the preparation of R&D claims?  Is there a defined process? Do you use a third party provider?

The first step to successful adoption of WhisperClaims is to work out how and where it can add value. Spend time really pulling apart how things are currently done, and look for gaps, bottlenecks and inefficiencies. Once you’ve identified these, you can look at how WhisperClaims could help. If, for example, you’ve been turning down opportunities because the claims are too small to be economically viable, think about how WhisperClaims could be used to remove costs from the process. On the other hand, if you currently outsource everything, think about how and when this can be brought back in house. 

Mind the gap

2. Find your champion

Ok, you’ve worked out how WhisperClaims can actually help your team. Now it’s time to find yourself a hero! It might have to be you, or you might have to persuade someone from the team to join you, but having a champion could be key to the whole endeavour. They’ll need to have good rapport with the team, be excited about WhisperClaims, and, for maximum success, be generally skeptical about change. If you can persuade the most cynical member of your team to be your champion, you’re half-way there!

3. Education, education, education

Right, it’s time to start training! Make sure you pitch the training at the right level – experienced teams won’t need a primer on the R&D scheme, for example, whereas if the team have never directly done an R&D claim, then diving straight into the software might leave them confused and more resistant than ever.

Make sure that you, and your champion, are clear on what pace your team will need in order to build their confidence. Some members of your team may find change overwhelming, so this will be your chance to show that you understand their needs and to get people on board.

training your staff in R&D tax relief software

4. All aboard!

Hopefully the training will have gone a long way towards getting the team’s buy-in for WhisperClaims, but you’ll probably still want to continue to work on this. Take the time to sense-check your plans with the team, and ask how they think WhisperClaims could be best used. Don’t let them override your plans, but do be prepared to make adjustments to include the team’s input and ideas.

5. Testing, testing

Ok, your plan has been optimised and the team are onboard – it’s time to get going! At this point, it’s a good idea to identify a particular subset of claimants to trial the software with. This might be new claimants only, or just smaller claims, but the key thing is to make sure that enough claims are put through WhisperClaims to give you enough data to analyse the effects of using the software. 

r&d tax software for accountants

6. Results and rewards

Once the trial is complete, it’s time to look at the results. How much time or money was saved? Were your clients satisfied with the process and output? How did the team feel about using it? Make sure to celebrate the success of the trial, and reward the team members that engaged with WhisperClaims. Show a league table, publish stats on profitability, give out chocolate – whatever it takes to get the final buy-in from your team!

7. Roll-out

So, you’ve convinced the team, tested the tool and refined the process. All you need to do now is roll it out far and wide. Work with your team to identify potential claimants, market R&D tax relief services to your client base and start putting as many claims as possible through the system!


Have you worked out if your clients are eligible for tax benefit yet?

Get some useful tips from our free online guides.

 

Lies, damned lies and statistics

It’s statistics time again! That one hallowed day of the year when I get to take off my Operations Director hat and let out my inner scientist. The annual Research and Development Tax Credit Statistics have been released, and, as usual, they make very interesting reading.

Now, from this point, I could just copy and paste the blog I wrote last year, because the trends in the data are remarkably consistent. The 20% year-on-year increase in the number of claims continues, as does the rise in first time claimants, which is great news for us and the R&D tax relief industry as a whole. However, I’m more interested in digging further into the stats, and looking at how they can be used and manipulated.

One statistic that all R&D tax relief specialists will tell you is that the average tax benefit from an R&D claim for FY2017-18 is £54,000. They’re not lying. If you take the overall total paid out in R&D claims and divide it by the number of claims, you get that number. Great, you might think, I’ve got lots of clients who could claim R&D tax relief, and would be really happy with a payout of £54,000.

However, looking a bit harder, and you’ll see that a very different story emerges. In FY2017-18, 76% of SME scheme claimants received less than £50k in benefit. Looking specifically at this group, the average tax benefit is only £16k, a serious drop from the quoted £54k. That’s not to say that most claimants wouldn’t be happy with £16k in benefit, but they might if they were expecting three times that!

The other statistic you’ll see time and time again, often alongside the £54k figure, is a company claiming a ‘100% success rate’ with R&D claims. Sounds great, doesn’t it? But it all depends on your definition of success, and, just like the R&D stats, can easily be manipulated to the point of being meaningless.

So, why would we point this out? Well, partly because we love it when statistics and marketing are aligned and being used to tell compelling stories, and partly because we’re suckers for upfront honesty. While statistics aren’t always what they seem, we’ve expended a huge amount of time and energy in developing a system that is what it appears to be – a straightforward way to gather information from your clients and the means to prepare robust and editable R&D reports at the touch of a button. While your success rate may not be 100% (clients sometimes go bust or miss the deadline), at least you can be sure that you’re using a system that is specifically and unashamedly designed for one purpose – helping you to take effort and cost out of your R&D process while enhancing your clients’ experience of working with you.

WhisperClaims nominated for the Scotland Tech 50

Last week we were surprised and very flattered to find out that WhisperClaims has been included in the long-list for Business Cloud’s Scotland Tech 50. The aim of this award is to recognise the 50 most exciting, disruptive and impactful Tech companies in Scotland, so to even be nominated feels great! It’s extra special as it came out of the blue – no entry forms or nominations from us!

It’s especially mind-blowing to be included in a list alongside some of the biggest names in Scottish Tech – SkyScanner and Freeagent, to name just a couple. Having only been in business for little over a year, it’s incredible to be spoken of in the same breath as so many really successful companies.

Inclusion in the final list of 50 depends on both the votes of the judging panel and the result of a public vote, so if you feel that we fit the description of an exciting and disruptive company, we’d love your support!

Simply go to the Scotland Tech 50 website, scroll all the way to the bottom and click on WhisperClaims. Voting closes on 9th October at 11pm, so you’ll have to move fast. Fingers crossed!

We’ve been shortlisted for the Scottish Financial Technology Awards!

Our Jen Badger gives us her heart-felt account of what it means to be shortlisted for the Scottish Financial Technology Awards a year on from the launch of WhisperClaims. 

Back in August, we were thrilled to hear that, on the back of our winning ‘Emerging Fintech Company of the Year’ at the Scottish Accountancy and Financial Technology awards, we’d been nominated for two more! We’re up for the ‘Product Innovation’ and ‘Rising Star’ awards at the Scottish Financial Technology Awards.

As a software start-up, any and all recognition is special. You work hard designing, developing and building your product, making something you’re really proud of. Then you start trying to sell it, and suddenly expose your baby to the reality of the world. Fear sets in as you consider how people might respond to your product. But then soon enough, after all of that hard slog, you impress someone. In fact, you impress them so much, they actually nominate you for an award. It’s an amazing feeling.

This latest pair of nominations is particularly special. We set out to produce a truly innovative and disruptive product, so to be recognised in the product innovation category is great validation of our product and business model. WhisperClaims is the only fully automated R&D relief claim platform in the market, and it’s great to have the team’s innovative development work acknowledged. It’s also incredibly flattering, a year since officially launching WhisperClaims, to be listed alongside such well-established names as Autorek, Hymans Robertson and even RBS!

As for the rising star category, well, that’s exactly how we feel! Over the past three years, we’ve risen from three of us sitting around a dining room table, mapping out our ideas on endless sheets of paper, to a fully-fledged company. We’ve got paying customers, a great team and a strong vision for the future, with no plans to slow down!

Having said all of that, if you were to ask me what I’m most proud of over the past few years, it wouldn’t just be the awards and nominations. I’m proud of what we’ve built – a great product, a happy customer base, and, most importantly, a great team. With all of that, no matter how it goes on the night, I know we’ll continue to feel like winners.

If you find yourself at the Scottish Financial Technology Awards on Wednesday 25th September please don’t be shy. We’ll be there, so come say hi!

Don’t miss out on a lucrative R&D tax relief payout!

“How can I identify clients that are eligible to claim R&D tax relief?”

If we had £1 for every time we’ve been asked this by a client, we’d (pauses to count on fingers) be rich! Seriously, it’s a common question, and one that’s surprisingly difficult to answer with more than an “it depends”.

The Government’s own guidance points out that R&D tax relief is not just for ‘white coat’ scientific research, as you might expect, but also for ‘brown coat’ development work in design and engineering involving overcoming difficult technological problems. However, this just broadens the scope and makes identifying eligible clients harder!

A process of elimination

If you were to ask us which of your clients definitely don’t qualify for R&D tax relief, that’s pretty easy. You can immediately dismiss all of you clients that are not limited companies – goodbye sole traders and LLPs! Once you’ve done that, we’d tell you to ignore any clients that are not going concerns, or already in administration – they’ll not be able to realise any benefit. The last easy filter is any companies that don’t have staff, and only pay the Directors dividends – unless you know that these companies have significant other costs, they won’t have expenditure to make a claim.

Narrow down the industries

After these easy black and white answers, however, everything turns various shades of grey. You could start by focussing on the industries and sectors where the most claims are made – the three sectors covering technical, IT and manufacturing account for 70% of claims, according to HMRC’s statistics. There will be a rich vein of eligibility within this section of your client base, and it’s a great place to start.

70% of claims

Identify the qualifying work

So, you’ve filtered out your definitely ineligible clients, and identified your technical, IT and manufacturing clients – what now? How can you assess the rest of your client base? This is where your in-depth knowledge of your clients, their businesses and their particular problems comes in. No-one is better placed than you to identify the clients who have expanded their product range through innovation and product development; taken on new staff to work on research products; received grants linked to development; employed staff with R&D-related job titles, such as testers, engineers, developers and designers; spent a lot on contractors to help with problem-solving; included costs for subcontractors, development or R&D in their accounts; or seen an increase in wastage and cost-overruns. 

Throughout this, you should bear in mind that qualifying work can include creating new processes, products or services, making appreciable improvements to existing ones, and even using science and technology to duplicate existing processes, products and services in a new way. 

Simplify your claims process

This assessment might seem daunting, even once you’ve filtered your list down to just those companies that you think are likely to be eligible. This is where WhisperClaims comes in – with its no obligation, real-time assessment of eligibility, you can enter the details of all of your potential claimants and let the system help you assess which of these to take forward, without incurring any additional costs.

Up to 33% back in R&D tax

Claimants can get back up to 33%!

So, why go to all this effort? Why make sure that all of your eligible clients are claiming? In short, because by not claiming, they’re missing out on a potentially lucrative payout for not very much work. Claimants can get back up to 33% of their eligible spend on R&D, and we’ve never met a company that wouldn’t welcome some extra income!

<<<Get your head around R&D tax relief. Read our free guides for helpful hints and tips. >>>

Emerging Fintech Company of the Year 2019 – another win!

Last week we were thrilled to be awarded ‘Emerging Fintech Company of the Year’ at the Scottish Accountancy and Financial Technology Awards. We were up against stiff competition in the form of two of our Codebase neighbours – Float and Mark to Market, and were genuinely surprised when our name was read out!

Although this is not the first award we’ve won, it does feel the pretty special. Funding the business ourselves, taking a risk on developing our R&D tax platform from an idea, to a prototype, to real customers, and now gaining recognition from the Accountancy sector, the very people who use WhisperClaims every day, is just a fantastic feeling.

The judges feedback also gave us a buzz – they were impressed by the WhisperClaims platform and its potential to massively disrupt an existing market, and by our capacity for future growth, both things we’re very excited about too!

Click here to read more about the awards, and see some more pictures of us in our finery!

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