A business team works together around a boardroom table to compile the documentation and proofs required for an HMRC R&D Tax Credits claim

Navigating Changes to HMRC R&D Tax Credits: Guide for Accountants

If you are a large or medium-sized UK accounting practice, you’ve probably had experience submitting claims for HMRC R&D tax credits for your clients. Historically, the process was straightforward – you’d do the numbers, put them together with the supporting technical report from the client, and submit the claim. Then, you’d wait for the money to roll in, and everyone would be happy.

Grantica’s founders, with years of combined R&D engineering and tax accounting experience, referred to this process as the ‘Happy Flow’ – a simple and straightforward transaction in which accountants relied on clients to write supporting technical reports, clients relied on accounts to do the numbers, the claim was submitted, and the relief was paid out. The chances of a claim being investigated by HMRC were very low, so the process was simple and straightforward.

The Decline of the ‘Happy Flow’

However, times have changed. Due to concerns over abuse of its R&D tax credits scheme, HMRC has committed to investigating claims more closely. Our founders’ observations of the industry in 2022 suggest that HMRC has increased its target to investigate more than 80% of submissions.

This means that the days of the ‘Happy Flow’, where only 5% of claims for HMRC R&D tax credits were investigated, are long gone. Now, when you submit a claim for tax credits, there’s a good chance that it will be subject to an HMRC enquiry, and you’ll need to be prepared to defend it.

Preparing for Enquiries Into HMRC R&D Tax Credits Claims

So, what does this mean for you? In short, it means that you’ll now need to consider not only defending the technical report written by your client, but also finding solid legal support to draft enquiry defences alongside engineers. This can be a daunting prospect, and it’s something that many accountancy firms and less experienced R&D agents may not be prepared for.

One solution would be to hire or scale up two teams – engineering and legal. These two teams would need to work together seamlessly with the tax/accounting team to put a claim together and be ready to defend it if it falls within the 80% of claims investigated.

Within your R&D tax credit claims workflow, you’ll need four departments: project management, legal, engineering, and tax/accounting. Funding and training these departments can be a costly and time-consuming process, and it’s not something that every business can afford.

The Grantica Solution

That’s why our founders launched Grantica. We offer a full-service solution that covers engineering, legal, and tax expertise to put claims together and defend them if they fall within the 80% that go to enquiry.

Offering the full complement of support you need, from claims management to enquiry defence, our experts can help you and your clients navigate the new landscape of R&D tax relief and ensure that your claims are robust and defensible.

The Challenges of Offering an End-to-end Service

Setting up in-house R&D claims capabilities robust enough to ensure your clients’ claims stand up to scrutiny can be a complex process, and it’s not something that every business can afford.

Many companies may have the relevant departments, but typically not all will be prepared to offer services to clients. For example, an engineering firm may have legal and accounting departments that were set up for internal purposes only. When offering an R&D tax relief claims service, these departments will have to work together to offer an end-to-end service to the client.

Grantica’s White-Label Service for HMRC R&D Tax Credits

In conclusion, as an accounting practice or R&D tax relief agency, knowing the basics of accounting for R&D tax relief is no longer enough – it’s now essential to be prepared for HMRC enquiries. But setting up legal and engineering teams can be costly and time-consuming, and it’s not something that every business can afford. Grantica’s white-label service provides a robust claims management process without the hassle and expense of setting up in-house legal and engineering teams.

Our full-service solution covers engineering, legal, and tax expertise, so you can focus on what you do best – supporting your clients.

Learn more about our white-label service and how we can help you grow your business

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