Customer experience in claiming R&D tax reliefs
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Last month, alongside the more widely publicised R&D Tax Reliefs Report, which contained details of the upcoming changes to the R&D tax relief schemes and the recent consultation responses, HMRC released another very interesting (to those of us in the sector!) report – a close look at the experience of claiming R&D tax relief from the point of view of claimants.
Although this report doesn’t contain anything particularly new or controversial, it’s still a fascinating read, and offers some great insights into how and why companies choose to claim, where they get their information from, and who they trust to give them this information.
Attitudes to R&D Tax relief
The first thing the report delves into is the attitude of the participant companies towards R&D tax relief. Unsurprisingly, the response to the scheme was wholly positive, with all respondents describing it as very positive for both themselves and the UK economy as a whole.
When asked how R&D tax relief affected the likelihood of a company undertaking R&D, the answers were mixed, and tended to depend on the size of the relief received. For those companies making sizable claims, it tended to be part of their strategic planning for R&D, and seen as a way of partly funding this work. Smaller claimants tended to see it as more of a bonus, and did not tend to plan their R&D spending around the claim.
Learning about R&D tax relief
Participants were also quizzed on where they had first heard about R&D tax relief, and where they turned to find out information about it. Happily, most of the companies had been initially informed that they might have a claim by their accountant or tax advisor, based on the accountant’s knowledge of the company’s activities and finances.
More worryingly, however, a small but significant proportion of the respondents first heard about the schemes through contact with specialist agents. These contacts tended to be through cold-calls, emails or LinkedIn contacts, and could be very frequent. This is concerning because, as anyone who has spent any time researching R&D providers knows, the quality and integrity of both the R&D specialists themselves and the information that they provide can vary widely. It’s possible to find providers offering detailed and highly accurate blogs on how to treat intangible assets all the way to providers asserting that all care homes can claim R&D tax relief (they can’t!). In fact, one participant went as far to describe these latter specialists as ‘rogue firms’ and ‘a risky game’.
The bad news for HMRC was that they are, literally, the last place claimants find out information about R&D tax relief. Participants said that they only access the wealth of online information that HMRC provide after they had heard about the schemes from other sources, but once they did that they found HMRC’s help better and more reliable than that from specialist advisors.
Choosing an R&D specialist
When it came to choosing whether or not to use an advisor to complete the claim, the decision came down to the internal capabilities of the claimant company, with larger claimants with internal finance teams being more likely to prepare the claim themselves. This decision was also influenced by whether the claimant has successfully claimed R&D tax relief before, and how difficult they perceive the process to be.
Once the decision had been made to use a specialist, claimants spent very little time researching which specialist to use, and most relied on their accountant to help make this decision. Where an accountant offered this service, either themselves or through a team within the same accounting firm, claimants were likely to choose to work with their accountant due to the existing relationship and trust they had with their accountant. This trust was also evident where accountants recommended specialist firms, with claimants more likely to work with specialists they had been referred to by their accountant, or by others in the sector who had previously claimed.
Once a firm had decided how to claim R&D tax relief, it was interesting to note that the process of claiming was almost identical no matter who the companies worked with to prepare the claim, with the only major difference being in how much of the work was done by the claimant company versus the specialist.
Recommendations for HMRC
A major theme running through the report was how much the claimants felt that HMRC should be taking the lead in increasing awareness of the scheme and policing both claims and providers. Several respondents felt that HMRC should be working to both promote the scheme to SMEs and simplify the criteria and language used to make it easier for first-time claimants to claim without using specialist advisors.
In reference to specialist providers, respondents also felt that HMRC could do more to provide training and support, and also information on best practice to enable claimants to be able to make better decisions about which providers to use, and be able to recognise these ‘rogue’ specialists more readily.