Navigating R&D Tax Credits: Guidance for Accountants

In an ever-evolving business landscape, it’s crucial for accountancy firms to stay informed about government schemes, such as the UK government R&D tax credit scheme.

As an accountant, you can help your clients boost their growth and development by helping them access their share of the £39.8 billion earmarked for innovation funding in the form of HMRC R&D tax credits for 2022–2025.

Identifying Clients Eligible for the R&D Tax Credit Scheme

When evaluating which of your clients may be suitable for R and D tax credits, it is recommended you partner with an R&D specialist tax accountant who is well-versed in R&D tax credit criteria to you identify eligible clients. As a starting point, look for clients who:

  • Employ skilled or technical staff
  • Work in regulated sectors
  • Undertake challenging projects
  • Have experienced project overruns or losses
  • Serve an industry requiring technical innovation to meet challenges, such as health, beauty, construction, waste management, software development, food and beverage development or packaging, etc

Once you’ve identified likely candidates among your clients, a qualified R&D tax expert like Grantica can support you as you qualify their R&D tax credit eligibility. We can provide qualification training to your team or arrange an information-gathering meeting with our team and your client to determine their eligibility for the scheme, depending on whether you opt to work with us as a referral partner or use our white-label service.

Understanding Changes to the R&D Tax Credit Scheme in 2023

Stay informed about changes in HMRC regulations, such as the changes to R&D tax credits announced in March 2023, to ensure your clients can still make the most of the government R&D tax credit scheme and submit HMRC-compliant, confident claims.

Due to concerns over abuse of its R&D tax credits scheme, HMRC has recently committed to investigating claims more closely. In late 2022, it was announced that an additional 500 enquiries would be raised randomly each year.

So far in 2022–23, 84% of closed 1-2-1 enquiry cases on claims in the SME R&D scheme have found the claims inaccurate. The average additional amount due in taxes as a result of the inaccurate claim is £128,000.

Now, when you submit a claim for tax credits for your client, there’s a good chance that it will be subject to an HMRC enquiry, and you’ll need to be prepared to defend it.

HMRC’s intention in increasing the number of enquiries on R&D tax claims is not to put companies off applying for tax relief – on the contrary, the UK government is highly aware of the value innovation brings to the economy and intends this form of corporation tax relief to serve as an incentive for domestic research and development projects.

The intention of the increased scrutiny on claims and stricter claims process is to encourage companies to make careful, considered claims for eligible projects, and to ensure that the budget for innovation post-funding is invested in valuable R&D for the benefit of the economy.

An experienced, expert R&D tax credit claims consultant like Grantica can ensure that your clients claim for the maximum available to them under the scheme, with the confidence to ensure that what is claimed for meets HMRC’s standards and is fully legally defensible under the BIS definition of R&D and R&D tax relief regulations. This comes from more than 200 years of collective experience from our engineering, legal and accounting team, and the learning gained from processing more than 1,000 claims across a variety of sectors.

Debunking Common Myths About R&D Tax Credits

As an accounting partner, it’s crucial to dispel myths surrounding R&D tax credits and reassure your clients by providing accurate information on R&D tax credit accounting treatment, government R&D tax credit scheme rules, and available R&D tax credit services. Some key points to remember:

  • Making a claim does not require excessive time investment from clients – Grantica estimates the total time commitment when our team handles your client’s claim to be about 7 hours. We handle the rest
  • It is possible to claim both R&D tax credits and grants in certain circumstances
  • Everyday activities can qualify as R&D
  • Loss-making companies are equally eligible to claim R&D tax credits as profit-making companies
  • Failed projects can still qualify for R&D tax relief
  • The government does not restrict its definition of R&D to high-level engineering firms, laboratories or high-tech projects.

This last point is especially crucial. R&D tax credits support businesses of all sizes and sectors engaged in creating or modifying products, processes, or services. HMRC’s definition of R&D is intentionally broad to accommodate different types of businesses and sectors.

Presenting the R&D Tax Credit Scheme to Clients

When introducing R&D tax credits to your clients, consider illustrating the following benefits an R&D tax relief payment can offer, such as:

  • A reliable annual funding source (where R&D is conducted annually)
  • Improved cash flow
  • Support for future growth and reinvestment in R&D projects
  • Attractiveness to investors
  • Minimal time investment for a valuable result

Educate your clients on the R&D tax credit application process, R&D tax relief for SMEs, and the calculation of R&D tax credits using printed materials, online resources, and sector-specific information. Using the Grantica Research and Development Framework (GRDF)TM and an R&D tax credit report example will help to demystify the process.

Accountancy Partnership with Grantica

By forming an accountancy partnership with Grantica, you’ll have access to a team including experienced engineers, legal professionals and accountants. Our R&D tax credit specialists are well-versed in HMRC R&D tax credit policies and SME R&D tax credit rules. Our unique GRDF ensures a rigorous process that maximises claims while protecting clients legally.

Our R&D tax credit services include dedicated points of contact, resources for understanding R&D tax credit calculation examples, and regular updates on clients’ claims.

Key Takeaways

When you form an accountancy partnership with Grantica, you’ll significantly enhance your clients’ business prospects and add value to your services. By identifying eligible clients and effectively communicating the benefits of R&D tax credits to them, you can foster even stronger relationships with your clients by bringing them added value and educating them on a little-understood area of corporation tax.

Partnering with a reputable service provider like Grantica ensures a comprehensive approach, which will give you the time to do what you do best – supporting your clients – while we handle the heavy lifting of claims management.

Learn more about our accountant partnership programme and how we can help you grow your business


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