Festive opening times
We know that some of you will be turning off your laptops and starting the festivities very soon, we want to wish you a merry and peaceful Christmas and a happy New Year.
We're going to take some time to put our feet up over the holidays, but will still be available to support you on the phone and by email. The only days we won't be contactable will be the 25th and 26th December and the 1st and 2nd of January. Otherwise, please don't hesitate to get in touch!
We've really enjoyed working with you in 2019, and look forward to a great 2020!
R&D tax relief trends for 2020 – Richard’s predictions!
Somewhat incredibly, as we find ourselves staring hungrily down the mince-pie-studded path towards Christmas, the cheeky green shoots of 2020 are clearly visible through the faded, well-trodden lawn of 2019. So what’s happened over the year in terms of HMRC’s R&D tax relief scheme – and what’s coming next?!
Well, it’s certainly no news that the R&D scheme overall continues to expand like a festive waistline. HMRC’s stats, released in October, showed that the projected cost of support for the 17/18 year is approaching £5bn, largely fuelled by growth in new SME applicants and the huge R&D budgets of Large Companies.
What is more newsworthy is how you, our WhisperClaims customers, are having a positive effect on that fast-growing SME market. This year, we’ve watched as a broad variety of accountancy firms and consulting companies have sat through software demos, launched trials, and thought deeply about how to integrate R&D technology into their business processes – all with the aim of being able to profitably cater to that ever-growing demand from SMEs.
Looking across the cohort of our 2019 customers, the firms (and consulting companies) that have achieved the best results are those that have:
1. A ‘digital R&D champion’
This person is typically enthusiastic about technology and motivated to see it adopted within their organisation. They quickly become an expert user of the software, often running classes and workshops to motivate and educate their colleagues. In some cases this is a partner or business owner, in others it's a manager who's seen the benefits of using our system and is evangelising it across the firm.
2. Invested in business process design
Software doesn’t work in a vacuum, and depends on the aims, attitudes and skills of the people using it. The most successful firms have invested time in designing business processes around the software, giving staff clarity on how R&D work should be streamed between different delivery routes. For them, the software isn’t necessarily a magic ‘one size fits all’ solution, but part of a blended R&D service portfolio that spans pure-software to pure-consultancy.
3. Trained & educated their Client Managers to spot R&D
The most proactive firms have trained up their Client Managers to recognise R&D at a high level, even developing scoring systems that allow prospects to be objectively rated before being entered onto the system or passed to a centralised specialist within the firm.
4. Growth targets
Finally, we’ve seen several firms set ambitious ‘digital’ targets (i.e. claims prepared through software) for R&D, both for existing clients and new business. Growth targets, coupled with internal competition between teams, can be highly effective in raising activity and motivation.
In general, the customers who've seen the biggest growth in their R&D service, and their profitability, are those who have utilised our service to deliver a highly differentiated and cost effective offering to those smaller SME's that are dominating HMRC's stats.
What R&D trends do we expect to see in 2020?
Looking ahead to 2020, what trends do we expect to see? Some are obvious (the scheme will continue to grow, of course), and also, we’d expect to see more accountants take R&D work back in-house, reducing their reliance upon external R&D consultants and earning more in the process. This growing trend of empowerment will heighten the already fierce competition between the specialists, resulting in ever more expensive PPC (Google advertising) costs for common online searches, incentivizing them to invest in other, more content-focused forms of marketing that will inevitably attract even more SMEs to the scheme. The SMEs, meanwhile, will gradually begin to realize that they have more options than simply shopping around for the lowest contingent rate, and we’d expect to see WhisperClaims accountants and consultants increasingly offering R&D as a fixed-price service to take advantage of this.
In short, it’s going to be quite a bustling marketplace in 2020 – even before the as-yet-unknown political impacts of the election are felt.
As for the team at WhisperClaims, there will be exciting changes afoot here too! We have a raft of new features to launch and will be investing heavily in the system’s ‘User Experience’ to make the software as intuitive, useful and convenient to use as we possibly can. We’ll also be staffing up, taking on new developers and boosting the remainder of the team as we continue to scale up. We’ll be launching and delivering a raft of new top-up consultancy services, designed to help our customers plug any gaps they may have in their teams by giving them access to very specialized services that build upon the capabilities of the software itself.
Before WhisperClaims, Richard was a Founder-Director of a large, Edinburgh-based R&D tax credit consultancy. With 9 years' R&D experience and a Software Engineering degree, Richard works closely with our developers to ensure that the products we build are a perfect fit for our customers.
5 ways to optimise your R&D tax claims process
Tips to keep your R&D tax claims on track
We’ve all been there. You’re snowed under with work, whether that’s dealing with company year ends and or the looming horror of personal tax deadlines, when you realise that there’s a whole pile of R&D tax claims that you should be dealing with. Your heart sinks. You think about how hard it is to get the information out of the client, how time consuming writing reports is, and how it really is time to make sure everyone in the office has been trained in how to prepare R&D claims. You throw your hands up and declare that there must be a better way!
You are, of course, right. There are always ways to improve and optimise your process, and, being the helpful people that they are, Jen and Richard (our WhisperClaims R&D tax relief gurus) have pulled together some tips on how you might get started!
1. Avoid unnecessary duplication
We know that getting information out of your clients can be difficult and frustrating. To avoid unnecessary repetition and to and fro, we recommend developing a structured set of questions to ask you clients about both the projects and costs. Making sure you work through the same questions each time makes sure that nothing is missed and there’s no need to keep going back to the client for more information.
2. Use cloud based technology to gather client data in advance
There many ways to make gathering client data more straight forward. During the claim period, it can be helpful to encourage your client to gather and submit project information as they go along. Having shared access to online file-storage, like Dropbox, can make this easy, straightforward and, most importantly, secure.
3. Build your team knowledge
The more people in your office that can work on R&D claims, the more the burden can be shared! We recommend making sure that you offer robust training in the CIRD guidance and the mechanics of putting together a claim to anyone with a client-facing role.
4. Collaborate with your client
Even once you’ve been able to gather the information from your client, you still need their input in reviewing and approving the claim. Making sure that the client can access the information as you pull it together can be a massive help with this, as the client is already in the loop and can give immediate sign-off once the claim is ready.
5. Reduce the time it takes to put a claim through
Even with a well-trained team and a slick information gathering process, you still have to invest the time in writing a robust technical narrative to support the claim. No matter what, this isn’t a trivial task, and is a great candidate for automation.
WhisperClaims is designed to take the pain out of not only gathering information, but automates report production, meaning that a report can be generated within an hour. It’s also a great tool for educating your team in the intricacies of R&D tax claims, and can allow you to work with your client in real-time, overcoming the toing-and-froing that plagues anyone preparing a claim.
If you are already using WhisperClaims you can find the login page here.
Have you had your WhisperClaims demo yet?
Take the burden out of R&D tax claims preparation. Our award-winning R&D software makes it easy to prepare a claim, works directly from your data, and creates reports that have been specifically designed to be clear, concise, fit for purpose and as free from red flags and elephant traps.
>>> Book your demo today >>>
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.
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.
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.
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!
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.
How Northern Accountants expanded their R&D consultancy services using WhisperClaims
It's always nice to catch up with WhisperClaims users. This month we met with Northern Accountants to talk about their recent expansion into R&D tax relief consultancy using WhisperClaims technology and how they used this to identify over £250,000 of tax benefit for their clients within 3 months.
Tell us a little bit about Northern Accountants.
We're a general accountancy practice. We do all the sorts of stuff you would expect like accounts, tax, bookkeeping on a sort of basic level. We don't have a tax team or a tax partner, so our tax knowledge is sufficient but not advanced. Fortunately, we don't have any complicated clients so there's no need to be more advanced.
How did you manage R&D tax relief opportunities for your clients before using WhisperClaims?
We outsourced claims to a R&D specialist firm. If any of our clients mentioned R&D it was a case of: “Oh, right. Well, we'll pass it their way and they can deal with it.”
What we ended up finding was that you get dragged into the conversations anyway. Yes, there's a pay-away, and, yes, you get a cut in, but there's still a lot of work to do. We seemed to be doing the bulk of the work, managing the client and managing the partner. So when WhisperClaims came along, it gave us a template and a structure to allow us to manage the process ourselves.
It takes an hour on average for a claim to be processed using WhisperClaims technology. Are you finding that?
Yeah, about the same. The first one was a bit longer because we were learning how to use the software – we spent an hour and a half with the client inputting information into the system followed by some set up time to synchronise the data with our accounting system, nothing major.
When the claim came through the client was over the moon – he received £15,000.
We are currently putting claims through for 9 clients and the tax benefit comes in at over £250,000, which is a substantial amount for our clients.
What inspired you to take it in-house?
I'm part of a Mastermind group with other accountants from different firms. One thing we do is share wins that we've had and someone was talking about the successes he'd had with WhisperClaims and R&D.
We contacted WhisperClaims and set up a demonstration. They showed me around the system about a year ago. We said we'd start in January once some claims had backed up … and we did!
We liked the simplicity of it. It plugged a specialist tax knowledge gap that we didn't have within the team.
What makes it quicker for you?
Moving consultancy in-house and using WhisperClaims technology meant that we were able to claim tax benefit for our clients within 28 days from submission to HMRC. It was closer to 45 days when we were outsourcing the work to R&D tax specialists.
What always held the R&D specialists up was the extraction of the financial information. The client wouldn't know what to do so they'd get us involved. The back and forth was time consuming, so it's much quicker just to do the work ourselves.
How has it benefitted your clients?
R&D wasn't on our radar as a primary sort of consideration. That meant that R&D didn't get talked about with our clients enough.
We've now got 15 clients who we are doing R&D with. We have an equipment company that has built a massive CRM; a software development company; a property agent that's built their own software platform; a food manufacturer; an IT company; a tripe reseller and so on. That's 15 sets of clients who hadn't been claiming R&D and potentially could have been.
What do your clients think of it?
You could argue that before we were doing R&D, we were letting our clients down to a degree. We're now able to talk to them about claiming and can put that opportunity in front of people.
Our clients give us lot of appreciation for this and they tell their friends about us: “My accountant got me £15k back from an R&D claim”. All of a sudden, someone's mate wants to get involved. Somebody rang us the other day and asked us if we'd do an R&D claim for his mate because his current accountant wouldn't do it.
What do you plan to do to grow your client pipeline?
I think we can build quite a good referral network off our existing client base and, potentially, smaller accountants. With smaller firms, technically, we could go and say: “Look, we'll partner up with you. We're no threat to your company. We'll do your R&D if you've got any clients who want this” and they become introducers to us.
I also want to do more to educate our client managers on how to find new business. We met with a food manufacturer yesterday who are trying to do some really innovative stuff with infused sausage rolls. It's funny but we need to find those types of projects.
You mentioned earlier you've got 9 clients who are currently eligible for tax benefit, what's that worth to them?
It's crazy, I'd say over a quarter of a million in total. If not more.
If we weren't offering R&D consultancy that money wouldn't have been recovered. It would have been lost.
What impact has WhisperClaims had on your firm?
It has created a bit of a buzz about the office. When we landed our first claim – I think it was a £22,000 claim – there was quite a big buzz about it. As daft and boring as that sounds, the team were quite buoyed by that. Lots more claims are being made by other members of the team outside of me. They're now starting to think: “We can do a decent thing here. We can help with that.”
Before we started using WhisperClaims and doing consultancy in-house, our team knew about R&D because they're all accountants. They understood it and the concept of it, but it's one of those topics that you cover and then never really touch on again. Whereas, I think now, our ability to service clients is much better.
Are they impacted by the fact that they're helping organisations?
100%. I mean, we're very fortunate in our team that they do care about the clients they're working with. When we told Sean, our client manager, that we were dropping £15k into his client's bank account, he was over the moon for his client. It's one of those nice feelings rather than just: “There's your tax bill of £15k“.
How did you find embedding it into the firm?
We're changing the structure of our organisation because, historically, our client managers purely just did compliance. Now they're having R&D conversations with people so our team will have to familiarise themselves with the software. That means there's an upskill area that we'll need to work on. The guys at WhisperClaims are helping us with some of that through educational tutorials and written guidelines.
We're also really committed to technology. Our team have got trust in our view on that. If we say it's good, it's going to be good. We've demonstrated that with Xeros, Receipt Banks, Chasers … all of that. We've demonstrated how technology can help them in their day-to-day job.
If you were going to recommend Whisperclaims to someone else, what would you say?
It gives us, as the accountants, control and it rewards us appropriately for the work that we do. So by having complete control over a claim, and being rewarded appropriately for it, it gets the due care and attention that it should. It also gives the firm a focus to deliver the claim because the return is big, especially with the WhisperClaims subscription and reporting fee being so reasonable.
It brings a cash injection into your business and gives you so many opportunities to do other things that you might not have been able to do before. From my point view, most opportunities are missed because people don't have cash reserves. Growth needs investment. So this helps put cash into the accountancy practice to help us grow in other areas.
Technology makes you more efficient, saves you more time, and makes you more money.
Have you worked out if your clients are eligible for tax benefit yet?
Get some useful tips from our free online guides.
Reservoir Dogs or The Beatles? Meet the team
Last month we hit a really important milestone here at WhisperClaims … it was our one year anniversary! Yay! Now, we're a modest team but one year is kinda special and we decided a small intimate celebration with blue and white balloons wouldn't quite hit the mark.
So a vote was counted, it was unanimous, let's go full celebrity and take it to the media like the divas we really are! A few days later our news spread to the press and we basked in our moment of fame!
While all of this helped to massage our egos a little, a sudden realisation dawned on us … we hadn't actually told anyone about our story and who we are! (Cue a blog post about the light bulb moment when WhisperClaims came to be!)
So let us introduce our team…
The ones who switched the light bulb on
Here's Mike Dean, Richard Edwards, Jen Badger and Rick Henry, our four directors.
Richard, Jen and Mike met when working at a successful Edinburgh-based R&D tax consultancy, founded by Richard in 2008. During Mike’s time as interim Sales Director, he noticed key trends in the R&D tax market, most notably the high number of claimants that were being turned away because their claims were too small to be economically processed by consultants. All three founders felt that automating the process of preparing R&D tax claims would be hugely beneficial to the industry, enabling smaller companies to access support and advisors to expand their offering.
While Richard and Jen took time out to polish up their technical skills and gain experience of software development and Agile management, Mike formed Whisperclaims and began gathering feedback on the idea of an automated, cloud-based system for the preparation of R&D tax claims.
Meanwhile, through his training at Codeclan, Richard met Rick Henry, our future Technical Director, and persuaded him to work with us to build the system.
Having gained all of the necessary skills and found a great developer, WhisperClaims was up and running! The prototype system was ready for testing within three months, and a few friendly accountants and consultants were recruited to help us test and refine the system. After only a few weeks of testing, the first claims were prepared and invoiced, and, more importantly, submitted to HMRC.
Having validated the concept and process, we set about building a front end and dashboards to create a great user experience. WhisperClaims officially launched in September 2018, and immediately gained traction. Rick Henry became Technical Director in October, and we were awarded ‘Best Use of Innovation’ at the UK Business Tech Awards in November 2018, which was amazing recognition of the hard work we’d put in up to that point.
The ones who made it shine brighter
Through 2019, WhisperClaims has gone from strength to strength. Highlights have included expanding our team, with our first additional developer, Upul, joining in January…
Suz, our Sales Coordinator, in April…
Then Gillian our Marketing Manager in June…
We won ‘Emerging Fintech of the Year’ at the Scottish Accounting and Financial Technology Awards in May, and were shortlisted for two awards at the Scottish Fintech Awards 2019.
One year on, we have over forty subscribed customers – from one-man band accountants to top 30 accountancy firms and leading R&D tax consultancies. That number has continued to grow every month since our anniversary.
So Reservoir Dogs or The Beatles?
While strutting our stuff down the streets of Edinburgh last week during a press photoshoot, we suddenly found ourselves forming a line-up that (with eyes a little squinted) might resemble something from the front cover of a well-known Beatles album or gangster movie. Though we may not be quite in the same league as the Beatles … yet (come on, there's nothing wrong with ambition!) … our little moment of fame give us a good chuckle and offered us some well deserved time-out to reflect on what has been an amazing year. Here's to 2020 and what that might bring.
Have you had your WhisperClaims demo yet?
Our fully automated, scalable and white-labelled software is capable of producing all the documentation needed to support an R&D claim within an hour. It is designed for business advisors of all kinds, including Accountants and R&D Tax Consultants.
>>> Book your demo today >>>
Or get in touch to find out more about WhisperClaims.
Our story: disrupting the R&D tax relief market
When you start to build a business, it’s inevitable that you'll have a number of goals in mind. For us, it was a mixture of things, but a core driver was to create something that could push boundaries and had the ability to shake-up and simplify the UK R&D tax relief consultancy market for the better.
After years of working in R&D tax consultancy, the team and I had observed a vast number of companies being turned away for R&D tax relief consultancy because accountancy firms were unable to process their claims. We made it our mission to resolve this problem.
Navigating the R&D tax scheme
R&D tax relief was introduced for SMEs in 2000 and extended to large companies from 2002. The scheme is designed to encourage greater R&D spending, leading in turn to greater investment in innovation and is one of the main tenets of UK government business support. The more innovation, the more likely we are to remain competitive as a nation, or so the mantra says, and in the current climate UK businesses need all the help they can get.
Our observation was that many SME’s, especially the ones with smaller potential R&D claims, found it hard to get support to access the scheme. Many didn't know that they are eligible, and even if they did, the 500 pages of HMRC guidance on the scheme was difficult to navigate!
Consequently, only around 43,000 claims were made under the R&D tax scheme in 2015-16, a tiny proportion of the UK business population and certainly only a small percentage of SME’s with eligible activities.
The landscape now
According to HMRC’s statistics, UK companies spent £31.3 billion on R&D during the 2017/18 financial year. This resulted in support from the Treasury of £4.3 billion, creating an estimated £1 billion in fees for accountants and specialist R&D tax relief consultants.
So, with so much to gain why don’t more accountants support their clients to make claims?
In the last two years, we’ve had the pleasure of personally meeting over 300 accountancy firms and have uncovered a few key issues with their processes:
- Lack of knowledge of the scheme. It’s seen as a niche tax area, many firms don’t have the knowledge and are fearful of providing poor advice.
- Lack of knowledge of their clients business or technology. Many accountants will say that they don’t understand technology so are unable to assess their clients potential eligibility for the scheme from that perspective.
- The return on investment. The market for R&D tax support has grown substantially over the last 10 years or so and is dominated by specialist providers who offer “no win, no fee” contingent fees. Many of them are hugely successful firms that do great for their larger clients, but for whom it isn’t always economically viable to work with smaller claims.
- Time consuming. Preparing claims for R&D tax relief without technology can be a time-consuming and difficult process, resulting in a buoyant market for consultants who help companies with their claims. Claims can take weeks or months to prepare through traditional methods, which is expensive for both the consultant and the client.
So what we have is a sector that, certainly from the perspective of the smaller SME, has a couple of structural problems. At one end, we have an army of high quality accountancy professionals who don't have the knowledge to be able to provide support to their clients in this niche area, and at the other end we have specialist providers whose business model means that they are unable to support smaller claims.
Finding a solution
Given the importance of the scheme and the fact that it is there to provide support to innovation and business growth in the UK economy, it seemed to us that there ought to be a role for technology to play in solving this problem, and thus opening up the scheme to a broader base of businesses.
And so our idea was born – a cloud based platform, easy to use, with all the help and guidance you could need to build your own R&D tax claims.
The system is white-labelled so any accountant or consultant can use it with their clients without the fear of affecting their brand value.
It's also capable of producing all the documentation needed to support an R&D claim within an hour, which enables accountants nationwide to service more clients and scale up operations without recruiting more staff.
Reports at the touch of a button
The most innovative aspect of the solution is our technology's ability to create comprehensive, detailed reports suitable for submission to HMRC at the touch of a button.
To prepare a claim, users of our technology are led through a responsive question set, probing all of the key areas of a claim to ensure that the end result is robust and defensible. Users can also invite their clients to sign-in and answer questions.
Unlike other systems that purport to generate reports, our system is capable of doing so without any free text entry – instead using a variety of sliders, multiple choice questions and numerical inputs to collect information about the client and their claim.
From a technical perspective, converting data into naturally written R&D reports was challenging to achieve and no other company has managed to achieve anything close to this level of automation. The time savings are considerable: a process that can weeks or months has now been reduced to an hour.
It's going well
Since development began in January 2018, our technology has won ‘Best Use of Innovation’ at the UK Business Technology Awards 2018 and the company has won ‘Emerging FinTech Company of the Year’ at the Business Insider Scottish Accountancy & Fintech Awards 2019.
In developing WhisperClaims, we have shown that it is possible to digitise a complex form of consultancy that was previously resistant to automation.
Where do we go from here? Scaling, testing, refining & listening to what the market needs. We've got plans to recruit two more members of staff over the next 12 months (read more about our team), to grow our UK customer base and to create new features and services to meet demand. It's going to be an exciting year ahead and a huge thank you needs to be said to our customers and to our massively talented team here at WhisperClaims for helping us to get to where we are.
Mike is Director of Sales & Marketing at WhisperClaims. He spent the 14 years prior to WhisperClaims as an Interim Director, coach and trainer in SME businesses across multiple sectors. Mike leads on engaging the marketplace and making sure that accountants and consultants are maximising the value of our technology in their businesses. Get in touch to chat to Mike in person.
Less is more – getting it right first time
In our last blog post (‘Avoiding the elephant traps when writing R&D reports‘), we talked about how to avoid some of the common pitfalls in applying for R&D tax relief. This time we wanted to focus on the positives – the things you can include that’ll help HMRC to understand what the claim is for and give them reassurance that it’s been prepared to a high standard by someone who really understands the scheme.
The first really helpful thing you can do is decide on the structure of your report. Even if you don’t provide reams of detail, it’s useful to show HMRC that you’ve examined a wide range of factors that can affect the claim. The ones we’d particularly recommend are:
- Boundaries of R&D
- Level of detail
- Area of advance
- Competent Professionals
Be up front about any grants that the company has received. Be sure to mention the type of the award (i.e. whether it is Notified State Aid, de minimis funding, or anything else). The reason to be clear is because grants have such a significant impact on the claim, so HMRC will be keen to see that they’ve been treated correctly.
Remember, any project that’s received State Aid will be bumped into the RDEC scheme for Large Companies, meaning that subcontractor costs for Limited companies must be excluded. If the grant was de minimis State Aid (or not State Aid at all!), then the grant-funded part of the project can be claimed through RDEC and the remainder routed through the SME scheme as usual.
Boundaries of R&D
In HMRC’s playbook, R&D doesn’t actually start until you’ve set out to make something ‘better’, encountered at least one significant technical challenge, and, crucially, tried to use all the standard or existing techniques that are usually applied in that situation. If all of those don’t work, then the R&D clock starts ticking while you try to develop a new solution that does work. Getting this boundary condition right shows that you’re an R&D ninja. Getting it wrong can be an instant red flag and land you with a time-consuming enquiry.
Level of detail
Some advisors seem to think that the longer the R&D report, the stronger the claim. Not true. While it’s always important to provide a level of detail appropriate to the size of the claim, it’s usually better to provide a small amount of really concise and relevant information than a War & Peace effort where much of the information is extraneous. Like you, HMRC are pushed for time and you can help make their lives easier (and happier!) by providing only what they need to make an informed decision on your claim. Be honest about who you’re writing for – HMRC, or your client (to justify your fees..?).
Area of advance
When it comes to the section on the technical advance, it often helps to include the area of science or technology in which the advance is being claimed. Why? Two reasons – firstly, because it helps HMRC get comfortable that the advance isn’t a commercial one (for example, using existing technologies to produce something that is commercially new rather than technologically new). Secondly, being clear about the area of advance makes it easy for them to check that you or your client have Competent Professionals in that particular area.
Speaking of which, it’s good practice to consider whether the people leading the R&D projects are credible ‘Competent Professionals’. This is usually the case if they have industry experience and qualifications in that particular field. If they don’t (as is the case in many IT projects, in which non-IT experts are asked to draw up a specification for a new system but aren’t directly involved in the technical details of its implementation) then perhaps draw breath to consider whether the company should even be claiming for that work at all.
As you can probably get from the above, there’s lots to consider when making a claim for R&D tax relief – and this is only scratching the surface. The good news is that WhisperClaims provides advisors (typically accountants and business consultants) with a framework for systematically and methodically working through all of these points – and generating HMRC-compliant reports at the touch of a button. For those who like to tinker, our reports are also easy to edit and customise, allowing you to focus your efforts on the fancy icing rather than on baking the cake in the first place.
With a growing number of accountancy firms starting to use technology to make their R&D processes more efficient, the future looks like one where advisors and their clients work together closely, supported by technology, to produce stronger results with less effort and cost. And that’s a future that we’re proud to be part of.
Have you had your WhisperClaims demo yet?
Our fully automated, scalable and white-labelled software is capable of producing all the documentation needed to support an R&D claim within an hour. It is designed for business advisors of all kinds, including Accountants and R&D Tax Consultants.
>>> Book your demo today >>>
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!
Avoiding the elephant traps when writing R&D reports
When making claims for R&D tax relief, most companies (or their advisors) will prepare a technical narrative to accompany the numbers. Ideally, this should give HMRC a clear idea of what the company is claiming for, and why it meets the criteria for relief.
Often, however, the company (or said advisor!) can fall into one of many elephant traps that are liberally sprinkled around the R&D tax credit landscape. We know that the last thing you need is to be looking up at the sky from the bottom of a dark pit (our metaphorical description of what it feels like to be facing an HMRC R&D enquiry), so have compiled this handy list of commonly made mistakes – and suggested how to solve them. Because we’re nice. And like elephants.
Trap Number 1 – Mixing up “research” with “research”.
Um, what now? Ok, I can see how this could be confusing. What we mean by this is that some companies confuse what is research for them with research as defined by HMRC’s guidelines (check out ‘HMRC CIRD81900’ for a fascinating ½ hour read).
Examples of this are companies writing things like “we've never done this before” or “it was difficult and required research because we didn’t know how to do this”.
The problem here is that the first question HMRC will ask is whether the company was operating outside its area of specialism. Just because they didn’t have the skills or experience to tackle the task, doesn’t mean that it is necessarily a challenge for the industry. An example of this could be an engineering company trying to claim for the development of a new IT system – they might be great at making shock absorbers, but lousy at software development.
So, if you find yourself writing ‘we didn’t know if we could do this’, be sure to explain why it was difficult and make it clear that you were operating within your sector of specialism (or if not, had at least engaged a competent professional able to recognise what is and isn’t R&D in the relevant field).
Trap Number 2 – Using the word ‘bespoke’
But wait, I hear you cry – ‘bespoke’ means unique, and unique means new, and new means eligible for R&D tax credits! Am I right?
Well, in some cases yes, but in many cases no.
The word ‘bespoke’ does indeed imply that the solution you developed is a one-off, but unfortunately that doesn’t necessarily make it eligible for R&D tax credits. Take the example of buying a bespoke suit – it’s beautiful, it’s fitted to you and only you, no other suit is exactly the same anywhere in the world.
The problem is that although the suit itself is a one-off, the process of making bespoke suits is well understood and carries no technical risk (in other words, there’s no ‘technical uncertainty’ associated with its production).
While this is a trivial example, the same principle can be applied to software projects. It’s common for companies commissioning a new IT system to think that because they’ve paid for the development of a system that’s exactly designed and configured to their specifications, that they can claim R&D tax credits for it. The issue here is that most often, the specification they set can be met by the IT company using existing techniques, methods and processes – so no R&D is involved at all!
Bottom line is, if you’re going to use the word bespoke, be prepared to explain which parts of the project or product advanced scientific knowledge. Being unique isn’t enough on its own!
Trap Number 3 – Get your boundaries right
We’ve seen some reports that are pretty expansive (or optimistic) about when R&D starts and stops. For example:
“The R&D began when the company first spoke to the client about the problem, and ended when the solution was implemented.”
Again, writing something like this is a red flag to HMRC’s Inspectors, who know that the early part of the project is likely to involve talking in more general terms about the project – its success criteria, costs and timings etc.
In contrast, the boundaries for R&D (for tax relief purposes) are defined as ‘when work to resolve the scientific or technological uncertainty starts' and ends with ‘when that uncertainty is resolved or work to resolve it ceases’. That’s a jargon-y way of saying that you must have met a significant new technical challenge in the project – and those challenges typically don’t pop up straight away (unless you’ve been specifically engaged to solve a problem that’s known to be R&D straight off the bat).
In summary, our advice is to be careful to show HMRC that you understand the start / stop conditions of R&D. A good way of doing this is to show in the report what the client did prior to any R&D, making it more obvious that the claimant is being respectful of the limits of the scheme.
Hungry for more? Read part 2 of our blog series: “Less is more – getting it right first time”.
Have you had your WhisperClaims demo yet?
The challenges of describing your projects in exactly the right way can be avoided by using WhisperClaims. Our award-winning R&D software makes it easy to prepare a claim, works directly from your data, and creates reports that have been specifically designed to be clear, concise, fit for purpose and as free from red flags and elephant traps as we can possibly make them.
>>> Book your demo today >>>
Don’t get bamboozled by grants
The interaction of grants and R&D tax credits is one of the least well understood parts of HMRC’s R&D Tax Relief scheme, but it doesn’t have to be – it’s actually not that bad once you understand a few basics! In this mini tutorial, we walk you through some of the key tips and rules and show you how these can be applied to your projects (or those of your clients).
The first thing to appreciate is that, from the perspective of R&D tax credits, grants can be split into two types: Notified State Aid, and then everything else (including de minimis State Aid). Notified State Aid is grant funding that has been notified to and approved by the European Commission; in fact, the SME scheme for R&D tax credits is in itself a Notified State Aid! To help prevent Governments over-subsidising their own companies, there is a rule that no project within Europe can be in receipt of more than one form of Notified State Aid. This leads us to Rule 1.
Rule 1 – You can’t use more than one form of Notified State Aid on a project.
This means that if your project has already received State Aid (such as a SMART grant), you can't apply for R&D tax credits under the SME scheme. Technically this applies for the lifespan of the project, so accepting a State Aid grant in one year will preclude claiming SME R&D credits in all subsequent years. However, the news is not all bad! (See Rule 2.)
Rule 2 – You can claim for State Aid-funded projects through RDEC.
More of a tip than a rule, but anyway – RDEC stands for Research & Development Expenditure Credit, which is the scheme available for Large Companies (those with 500+ staff) conducting R&D in the UK.
If you are an SME with a State Aid-funded R&D project, you can normally claim relief under RDEC – which unlike the SME scheme is not a form of Notified State Aid. It doesn’t matter what percentage of the project has been funded by State Aid – all of its expenditure is affected! Here are a couple of examples.
Example 1: £100k project funded by £40k of State Aid.
Example 2: £100k project funded by £10k of State Aid.
In each example above, the whole project must be routed through RDEC, irrespective of how much State Aid it received. So be warned! As an SME, accepting even small amounts of State Aid can have a big impact on your ability to claim for R&D tax relief.
Ok, that’s the evil form of grant funding out the way. Now let’s look at what happens when we fund R&D projects with grants that are not Notified State Aid. Well hello Rule 3…
Rule 3: Non State Aid grants split your project into SME & RDEC components.
Compared with the fire-breathing dragons of State Aid, other forms of funding are much nicer, fluffier creatures. Instead of forcing your whole project into the RDEC scheme, they affect only the amount they subsidise, with the balance allowed to go through the SME scheme as usual. Let’s look at a couple of examples to get a feel for how this works.
Example 3: £100k project funded by £40k of other grants.
Example 4: £100k project funded by £10k of other grants.
In each of these examples, the part of the project subsidised by the grant is routed through RDEC. The remainder goes through the SME scheme as usual. For most companies, this is the best of both worlds – you get your grant, and you also get to claim for a lot of the SME tax credits; nice!
While there is still a bit of complexity we haven’t covered (for example, not all costs eligible under the SME scheme are permissible under RDEC), we hope that gives you a clearer idea of how grants affect claims for R&D tax credits. State Aid is ‘bad’ – but not as bad as people think, as it doesn’t stop you claiming, it just changes how much benefit you get from your claim. Non State Aid is ‘good’, in that it nourishes your projects while not preventing you from claiming for the majority of your oh-so-tasty SME R&D tax credits.
The great news is that all of the above information is baked into WhisperClaims – a robust, cloud-based system that allows you to prepare claims for your clients quickly and with as much expert knowledge as we could pack in (which was a lot).
<<<Boost your R&D knowledge with our clever guides on making a tax relief claim.>>>
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.
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.
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. >>>
De-bunking the myths on R&D tax credit claims
Despite the fact that HMRC’s R&D tax credit scheme is now close to 20 years old (how time flies!), there are still quite a few stubborn myths and questions that never quite seem to go away. To help banish them once and for all, we’ve compiled a list of three of the most common – we hope these haven’t got in the way of your claims over the years!
Myth 1: “We can’t claim for projects that failed”
Like many good myths, there’s an element of truth to this. If the project has failed for business, commercial or legal reasons (or, gulp, due to poor leadership or mismanagement) then yes, that’s not good.
If, however, the project failed for technical reasons, then from the perspective of R&D tax credits, this can actually be positive, as it shows that what you were trying to achieve was genuinely challenging, even for experienced people.
So, if projects fail, you don’t necessarily have to push them into a darkened room and forget about them.
Top tip: Instead, keep a note of why that project failed, and if it’s a technical reason, the work might be worth considering as part of your claim when you come to your year end.
Myth 2: “We can’t claim for projects that received grants”
Ooooh, this is a horrible one – and we hear it quite a lot. It’s horrible because people believe it, don’t look at how the scheme works and end up losing out big-time as a result.
Unlike Myth 1, there is no element of truth to this. You can claim for grant-funded projects, but you’ve got to do it correctly and the benefit you receive will vary depending on the size of the grant and whether it’s Notified State Aid.
As a rule of thumb, if a project has received Notified State Aid (no matter how small) then all of that project’s expenditure should be routed through the Research & Development Expenditure Credit scheme (RDEC) – that’s normally used by Large Companies.
Conversely, if you have a £100k project that’s been subsidised by a £30k grant that is not Notified State Aid, then £30k of the project would go through RDEC and £70k will go through the SME scheme.
Top Tip: The moral of the story is: find out what type of grant you received!
Myth 3: “We can’t claim for the work because we were paid to do it”
This is a really interesting one. Again, it’s based on truth, in that if you are contracted by an SME to perform R&D, you can’t claim (instead, the commissioning SME will be claiming R&D tax relief on the payment they made to their subcontractor – you).
However, the first point to make is that if you are commissioned to perform R&D by a Large Company (usually one with 500 or more staff), then you are generally able to claim through RDEC yourself, as the commissioning Large Company cannot claim R&D tax relief on the costs of its Limited Company subcontractors.
The other, more subtle point, is that many contracts between companies and their subcontractors do not explicitly state the need for R&D. In short, the contract is for a defined piece of work and the need for R&D is often not mentioned.
Now, it may be that as a subcontractor delivering such a contract, you can do what’s required by using existing knowledge, processes and techniques. In this case, no R&D is involved and it would be inappropriate to claim R&D tax relief.
On the other hand, you may decide to launch your own project – at your own cost and risk – to develop a new capability that will assist in delivering upon this contract, and similar contracts you might win in the future. In this case, there’s usually an argument to be made for claiming R&D tax relief under the SME scheme.
Top Tip: Check if the contract with your client explicitly states the need for R&D and if you have an argument for making a claim.
Don't get bamboozled!
The great news is that all of these myths are comprehensively busted in our software platform, WhisperClaims, which was designed from the ground up by people who’ve worked in R&D tax credit consultancy for years. The software helps you evaluate work that might have failed, handles all kinds of grant situations (such as using Notified State Aid and de minimis funding on the same project, for example) and even takes you through the complexities of working as a subcontractor for other entities, whether SMEs or Large Companies.
There’s a lot going on in our system, and we feel the best way to explain it all is to show you. That’s why we’re happy to arrange a free demo and consultation, so that you can decide whether it’s right for you or your clients.
>>> Get it touch to arrange your free demo and consultation >>>
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!
How technology is starting to impact the R&D tax market – FreeAgent Webinar 27th March 2019
We had the great pleasure of being hosted by our friends over at FreeAgent back in March, where we delivered a webinar on the impacts of technology on the R&D tax market.
Delivered from the in-house studio at their Edinburgh HQ, the webinar attracted an audience of almost 100 accountancy firms from across the UK. The session covered off some of the key stats that we see in the market, the overall growth of the R&D tax scheme and our observations about the direction of technology in this particular area of tax and accounting.
Of course, we also got to talk about our WhisperClaims platform and some of its key features, including the fact that it's white-labelled and therefore allows our users to maintain their brand presence with their clients (as opposed to farming work out to expensive consultants!), and our capped pricing which means your service will always be competitive and profitable!
The session wrapped up with some great questions, covering areas including:
- Accountant accreditation to complete R&D claims – is it necessary to register with HMRC or anyone else to be able to complete claims? No, this is an unregulated market
- How does your system ensure quality service delivery? We have a comprehensive and robust approach to the process of building a claim – user feedback suggests this is much more thorough than the existing, consultant led approach
- What's the likely impact of Brexit on the R&D tax scheme? Blimey, we didn't expect this one! – but it's interesting to note, at least anecdotally, that recent M&A activity in the R&D consulting sector has been led by overseas firms buying in to the UK – PR around this suggests that the UK market is attractive to international investors because, post-Brexit, tax incentives will continue to be a necessary part of stimulating the economy
- Does the WhisperClaims system integrate with other accounting platforms? Watch this space!
- Clarification of our pricing model. Does WhisperClaims address very small claims? Yes, we do! We have a low capped fee on our reports, so no matter how big your claim, our pricing stays low. For very small claims, we charge a % of eligible expenditure so no matter how small the claim, it will always be worth downloading
- How much training and scheme awareness is needed to create a claim for a client for the first time? We have a comprehensive on-boarding process. More importantly, post on-boarding, users have access to help within the system, tailored to every question, that offers a short help video, some key pointers and direct links to the relevant HMRC guidance. Additionally, we're always at the end of the phone to provide help and guidance. So, there's no need for you to be an “expert” – we're here to help!
- Does the system provide guidance on whether a project is eligible, or is that left up to the user to decide? Absolutely it does! Fundamentally, our system has been designed based on many years of experience as consultants in this market – Richard, one of our Founders, was a founder Director in one of the UK's largest consultancies – and has been designed precisely to address the needs and expectations of HMRC in justifying eligibility
Our FreeAgent host for the morning, Kevin Lord, did a great job of compering the session and making sure we answered all of the questions – we can't wait to be back for another FreeAgent webinar!
HMRC’s new portal for submitting R&D claims – here’s what we think
With not much in
the way of public fanfare, HMRC recently launched their beta online platform to
support the submission of SME R&D claims. As we’re in the R&D software
platform business ourselves, you can imagine we had been awaiting this
development with bated breath! So, now that it’s broken cover – what does it
look like and what’s it for?
Well, our first
impressions are that the tool is surprisingly basic and comes with a couple of
fairly substantial limitations. The good things first – it allows SMEs to
present their R&D claim information directly to HMRC. They can enter the
usual costs – employees, connected and unconnected EPWs and subcontractors,
software, consumables and costs for clinical trial volunteers. They can also
enter a technical description of their projects, covering the baseline state of
technology, the advance attempted, and the technical challenges faced on the
The big catch is
that the portal assumes that the SME knows what they want to claim for – and
that’s a big assumption. If you’ve ever been asked to assist with a client’s
claim, you know that they usually need help in assessing their SME status, the
boundaries of their R&D, and whether their work would even be considered
eligible by HMRC. In the new portal, however, there’s not much in-built support
to help claimants or agents who are unfamiliar with the scheme to answer these
questions. It also doesn’t help companies to calculate whether they’re an SME,
or support SMEs who have received grants, or undertaken work as a subcontractor
to a Large Company. This means that complex claims with expenditure eligible
under the SME and RDEC schemes are
essentially not supported at all. That affects a pretty chunky number of
companies, particularly within the life sciences and manufacturing sectors.
Maybe these areas
will be addressed in the future. In the meantime, we’re confident that WhisperClaims,
our award-winning cloud based platform for R&D tax submissions, will continue
to prove more useful (and useable) to our accountancy clients, helping them
generate significant additional revenues by delivering truly comprehensive R&D
support to their clients.
“Tech Start-ups don’t need MD’s”
Great article about our management structure and, well, overall approach to managing our business, published in todays BusinessCloud and written by Tech Journalist and Editor, Mo Aldolou:
2018 UK Business Tech Awards – we won!
When we were first shortlisted for the “Best Use of Innovation” at the UK Business Tech Awards, we were over the moon at being recognised as part of a cohort of eight outstanding shortlisted businesses. The shortlist included a household name with a high profile and an extremely catchy TV advert, and a couple of businesses with significant VC backing.
Imagine how pleased we were on Tuesday night when we were announced as Winners!
A few days later and we're still reeling from the whole experience. Not because we are surprised to have won, because of course we think we're awesome, but simply because it's such a great feeling that peers in the tech sector recognise that what we have achieved with our WhisperClaims app has been a difficult challenge, requiring great levels of technical insight as well as significant domain knowledge in the sector.
Our market reach continues to expand, with users in both the accounting and business consultancy sectors embracing our technology to build new revenues and remove costs from existing processes. In line with this, our technical team is expanding so that we can continue to embrace innovation, developing new features and refining the user experience whilst thinking about new markets to exploit in the future.
Whilst all of this work continues, we are delighted to just take a moment to enjoy our success.
Here's to another great year in 2019 – let's see what we can win next year!
Click here for a Video of Richard & Jen immediately after winning the award – still in a state of shock!
HMRC R&D stats 2018 – what’s new?
It’s that time of year again. All over the country, R&D tax credit advisors and consultants are locking themselves away in darkened rooms, often with a marketing expert sitting alongside, and poring over the latest R&D tax credit statistics from HMRC. Their aim? Breaking the statistics down into nice, neat bitesize chunks to be pumped out into a series of blogs, tweets and posts. It’s thrilling, and we just can’t resist joining them!
Here at WhisperClaims, we might not have a darkened room or even a marketing expert to hand, but we are massive statistics nerds, and boy, are these massive statistics (badoom-tish!).
So, what have we learned from the Research and Development Tax Credits Statistics of September 2018? We could go on about how, if you look at the statistics one way, manufacturing companies are not making enough claims, or about how the number of claims made by Large Companies appears to be stagnating, but we’d rather focus on the good news – more and more companies making R&D tax credit claims.
In financial year 2015-16, 39,765 SMEs made claims for R&D tax credits, an increase of 25% compared to FY 2014-15. For the financial year 2016-17, 37,360 SMEs have already made claims, and this number will continue to increase over the next year as clients reach the deadline for claiming. When we crunch the numbers, we predict that this will reach over 47,000 claims.
What does this mean for the R&D tax credit market? Well, these numbers prove that the growth in R&D tax credit claims comes entirely from the SME market, many of whom are first time claimants making small claims, for whom the traditional consultancy approach just isn’t suitable as processing costs for claims, and ultimately the market price for such services, are simply too high. As this trend continues, consultants and accountants will be coming under increasing pressure to process more claims, for smaller companies, at rock-bottom prices and margin. How can this be done? Given the costs of running a consultancy team, that’s a pretty difficult challenge – but one that WhisperClaims was specifically created to tackle. See what the software does at www.whisperclaims.co.uk – we’re confident that you’ll see the benefits for yourself during a 30-day subscription-free trial!
And if you want to read the full HMRC report, you can find that here
How do you test more R&D tax relief reports than there are grains of sand on Earth?
I don’t know about you, but it’s not often I get to dust off the theory I learned at university and apply it in real life. Recently, however, I had one of those oddly satisfying days when Computing Science gets dragged out of the cupboard and put to work. It started with a conversation with our developers about testing – specifically, what we should be testing and how to go about it.
By way of context, our software helps companies prepare claims for R&D tax relief, and one of its big strengths is that there is no free text entry – all inputs are multiple choice to make it as easy as possible for the user and their advisor. From those selections, the software automatically generates reports in natural, fluent English for customers to submit to HMRC. It’s beautifully simple to use, but the issue at hand was testing whether each combination of inputs yielded an acceptable report. To answer that, the first question we had to ask was ‘How many unique R&D reports can be generated by our app?’
Mmm, like, a lot..?
And this is where maths comes to the rescue! (I know, I don't get to shout that nearly enough these days…)
Let’s take a question that presents the user with 10 different types of R&D activity and asks them to check off the 5 they’ve done. Mathematically, the number of different ways you can do this is expressed as C(n,r), where n is the number of options and r is how many you can pick. The formula for C(10,5) is:
10! / ( 5! x 5! ) where 10! = 10 x 9 x 8 x 7…and so on.
This is referred to by mathsy people as ’10 choose 5’, or ‘how many ways can I pick 5 things from a set of 10’, and the answer in this case is 252. That would be a pain to test manually, but I guess it could be done within a day or so. However, the problem gets much, much worse when you start to consider multiple questions in combination.
Let’s say our next question contained 45 possible options and you again had to choose 5. This gives you another C(45,5) options, or 1,221,759. Uh oh. Worse, the number of possible outputs by combining these two questions is 307,883,268. Even if we were testing 10,000 combinations a second, it would still take more than 8 hours to test all the permutations!
At this point I knew that the problem was really big, but I couldn’t stop there – out of curiosity, I wanted to know just how big. So, on the back of a (very large) envelope I worked out that for the 50 or questions we use to prepare a claim, our software could generate around 4.25 x 10^35 different R&D reports. The exponent form doesn’t really do it justice – writing it out in full is 425,000,000,000,000,000,000,000,000,000,000,000, a number so magnificently big I don’t even have a proper name for it. It's far bigger than the number of grains of sand on Earth (around 7.5 x 10^18, apparently).
Anyway, why is this relevant? Well, while big numbers are inherently cool (ok, to somepeople, I admit), it's because the solution – the application of clever techniques to drastically reduce the problem space so that it can be robustly tested – is evidence of the thought, care and attention to detail that's going into getting the WhisperClaims software platform right. After all, when we're supplying thousands of software-generated-and-tested R&D reports for accountants and R&D tax specialists across the country, and doing so in a completely automated way, there has to be some pretty slick maths and Computer Science underneath all that nice, colourful UI/UX.
So when you generate your next WhisperClaims R&D report, please take a moment to consider that it is one of 4.25 billionty squillion, and just like you, it’s pretty special 🙂
The costs of producing a R&D tax relief claim – and why you might be too small
As a former founder of an established R&D tax relief consultancy, I'm perhaps more familiar than most with the costs of preparing a claim for R&D tax relief. Actually, since “preparing a claim” can mean a lot of different things to a lot of different people, I should say that these costs were just the ones I had to consider – clearly there are lots of ways to skin a cat. (Please don't skin any cats.)
The first issue, as with many companies, was finding good staff. Finding someone with good academic qualifications, industry experience and strong communication skills could easily set you back £45k, with employment taxes and pension costs taking that closer to £50k. Once you add in the costs of recruitment, providing that person with IT equipment, an office to work in and after allocating a share of the sales and marketing cost, you’re probably at around £75k, easily. Next up to consider is training – while your shiny new employee is getting up to speed, you’re probably not going to see much of a return on your investment. So, let’s throw another £25k into the pot for that, taking us to a nice, even £100k.
Next let’s consider the costs of engaging with clients (that’s clients, people who’ve signed with you, not prospects – let's ignore for now the steadily rising cost of acquiring new R&D clients in an ever more competitive landscape). As a former consultant, I was all too aware that my clients were busy people and that their R&D tax relief claim was rarely a priority…until just before the deadline, when often it became their top priority. Mostly, however, getting and holding the attention of busy stakeholders was difficult, which meant that claims could take weeks – or more often months – to prepare and get approved. Time is money, as they say, and time spent waiting was money wasted.
The third big expense to consider was the opportunity cost of doing business with a particular client and working on a particular claim. If we accepted a company and their claim was small, our fees were smaller than if we’d spent our time working for another company with a larger claim. That means that consultants, at least those working on a contingent basis, tend to screen their clients for potential claim size before offering them a contract. And guess what, that screening takes judgement, a risk assessment and more communication with the prospect – all of which burns yet more money, I mean, time.
All of this means that there’s a natural ceiling on the number of claims that a consultancy company can prepare (they only have so much time), and a lower threshold on the size of claims that they’re prepared to take on (with high costs to cover, they're judging you against what they might get elsewhere). This means that if you don’t have a particularly large company, or are deemed to have a ‘complex’ claim (perhaps involving grants, intricate corporate structure or are backed by a number of different investors), you might find that it’s hard to get help on a contingent basis – you’re just considered to be too much of a risk.
Now, if you’re an accountant who prepares claims, or a specialist R&D tax credit consultant, you might be nodding along ruefully at this point and wishing there was a better way. And yes, I’d agree, all the characteristics of traditional R&D consultancy mean that a large part of the market is currently being under-serviced, with lots of potentially valuable innovation going unrewarded in UK SMEs.
So why don't we do something about that, together? With your clients, your brand and our technology? Why don't we help more companies make more claims, support more UK innovation, help you get more clients and reduce your costs of delivery in the process? After all, wouldn't it be nice to never have to tell someone that they're too small again?
We’re off and running – a new approach to R&D tax claims!
After a hectic few months, I'm pleased to finally say that we've got the WhisperClaims team together and are ready to go!
Richard Edwards and Jen Smeed join as Director/Shareholders and Rick Henry as our Lead Developer.
We've built a fully automated software platform for the production of R&D tax claims. White labelled for Accountants and R&D Tax Specialists, we are able to produce R&D claims, from client engagement to full report production, in under an hour, all for a fixed fee irrespective of the claim size.
We're still pre-launch (website to go live later this month) but our early adopters are already generating revenue from the platform.
A revolution? We think so.
If you'd like to know more, contact us and we'll have a chat about how you can benefit.