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.