R&D specialists: expensive or money well spent? (blog)
It’s human nature that our buying powers are swayed by price - we love our money too much to part with it.
What persuades us to buy is the emotion we attach to the purchase: that special piece of clothing, that fancy mobile phone, that designer handbag etc. We buy it because we see it as an investment, not a cost.
Yet, when it comes to Research & Development (R&D) tax claims and using specialists, the exact same logic isn’t always followed. I regularly come across the same questions: “can’t my accountant just do this for me?”, “which is the cheapest specialist?” or “I’m not paying 30% when I can get it for 20%”.
Anyone who has submitted an R&D claim before will know that the process can be extremely complex. However, many may not understand what exactly it is they are paying for, which can lead to claimants seeking the cheapest options.
To help you make a more informed decision for your next claim, let’s explore what is included in those fees and what actually impacts the price.
1) Protecting your claim
Most experts work on a no-win-no-fee basis - otherwise known as contingent – which means you only pay if your claim is successful. This fee is typically between 10-30% of the claim amount, However, for the specialist, all the risk is on their work being good enough to be turned into revenue.
To be successful with this fee structure, those said experts need to be 100% ahead of the game when it comes to two things:
Knowing the legislation:
Firstly, it goes without saying, that all reputable R&D specialists will be up to date with the latest legislation.
However, as aspects of the legislation are continuously evolving - such as the changes coming into effect from April 2023- specialists need to make sure they’re at the forefront of any developments to best advise their clients. Companies that have a thorough understanding of the claim process, and implement changes quickly and effectively, tend to come with a higher cost.
Educating the public on the correct information about the legislation is also more costly than you imagine (see point 4).
Knowing how to handle an investigation:
This may be the most important cost of all - money that goes towards protecting your claim if you were prone to HMRC enquiry. Whichever R&D provider you are with, make sure you have a full understanding of what their process looks like in the event your claim was investigated. The level of protection will most likely be reflected in their fee price.
If they have joined forces with a respected insurance partner then it should mean you are covered and the specialist will stand shoulder to shoulder with you through an enquiry, for free.
However, you may find that the cheaper specialists will not have this protection and, if that’s the case, it will mean that you would be expected to finance an enquiry yourself. This process can be lengthy, tiring and most importantly expensive.
2) Their Reputation in the Tax Space
Credibility with HMRC is like money in the bank, but it costs to get to this level.
Whichever R&D provider you are using, knowing that its experts have a strong relationship with HMRC will be of great advantage. This typically comes with the size of the company, its length of service, investigation rate and its professionalism within the R&D space.
Specialists that have longevity in the industry typically have worked on an abundance of claims over the years. More claims mean more experience with investigations and legislative complications.
As such, the overheads for a larger company that has longevity and submits 2000 claims a year, compared with a small company that submits 100 a year, will be night and day. Again, this is something that will be reflected in the fee.
3) Credible Experts
Ever hear about the engineer hired to fix a boat engine? The long and short of it was:
10 run-of-the-mill companies had tried and failed to fix it
A specialist comes in, taps in the right place and, hey presto- it works!
The invoice read: Total: £10,000
Breakdown:
Hammer: £5
Knowing where to tap: £9,995
The moral of the story is that experts dedicate their professional careers to perfecting their art so that you don’t have to. In turn, this means they can charge a figure based on what that knowledge is worth to you as the customer. Where is your time better spent - doing your job or theirs?
So, as you can imagine, the world of R&D tax credits is no different.
These professionals are qualified and educated to an advanced level of technological and/or scientific understanding. Meaning they are well-equipped to explain even the most complex of projects in a thorough, yet jargon-free way- making your claim more appealing to HMRC assessors.
Experts working on your claim come in all shapes and sizes including tax analysts, researchers, report writers, accountants, tax advisors, investigation specialists and enquiry advisors. As you can imagine, these experts do not come cheap and - because they are in such demand - keeping them isn’t cheap either.
4) Being the educator
Unfortunately, a proportion of the R&D industry is filled with cowboy providers. These companies aren't following the correct guidance and are spreading misinformation.
So, it’s essential that reputable specialists educate their clients on how R&D claims actually work, as well as answer every question possible about their products/services, in an open and transparent way.
To get the correct messaging to the right people, R&D specialists need to invest a huge amount of their money into doing so. One of the most effective ways they do this is through partnering with professional bodies and partners.
However, this is a huge amount of investment, due to the sheer number of associations that exist, i.e. those in manufacturing, engineering, food & beverage, science, farming, automation, fishery, robotics, IT development, and many more industries. Then let's add to the mix other ways to reach you, including speaking opportunities, exhibition, workshop and webinar sessions, educational materials – the list goes on!
5) Staying ahead of the curve
The goal of an R&D specialist is to maximise your claim – more money for you and more money for them.
However, ensuring you receive the largest benefit means that companies must constantly review and adapt their knowledge and processes to do so. Whether this means implementing new technology platforms to improve your claim journey or utilising their partners to identify other areas where you could be claiming, many specialists are continuously evolving to help you receive the most money possible.
Do your research
With most external experts, the fee for R&D providers should be reflected by their knowledge of the industry, as well as the ability to provide their clients with top-class service. It’s essential that you research any specialist you’re planning to work with to ensure they are the right fit for you and your business. After all - as the saying goes - “if you think working with a specialist is expensive, wait till you work with an amateur”.
Get in Touch!
I’m here to help you get on the right track with your R&D innovation!
If you’d like to discuss more insights regarding making an R&D claim for your business, contact me here or email karen@innovationinsights.uk