Fiscale host webinar for the members of the Institute for Turnaround

John Mayhew – Chairman said, “We trust our team to deliver and the movement from timesheets to total flexible working has proven to be a great success and very much valued ”. I would like to take the opportunity to thank all our fantastic team, our trusted clients, the judging panel at the Awards and Investors in People.

Lucie Mayhew-Smith Fiscale’s HR Director commented ‘We continually look at working practices to improve, asking for employee feedback and ideas from the quarterly Employee Forum and the six-monthly Employee Survey. We strive to lead the way in flexible working practices and believe that our strategy is a USP for Fiscale when it comes to attracting, nurturing, and retaining staff.’

HMRC R&D Tax Credit statistics: September 2021

Each year, (around September/October) HMRC release in-depth statistics on Research and Development (R&D) Tax Credit claims that are being made throughout the year.

Within this article we will explore the key information that we can see and see what this means for the industry as a whole.

What can we tell from the latest HMRC R&D Tax Credit statistics?

First off, let me caveat by saying that due to the timing of the release, we can’t see the entire accounting period. However, in 2021’s R&D Tax Credit Statistics, we can see some interesting patterns emerging in the increasingly popular R&D Tax Credit schemes.

It’s great it is to see an increasing number of companies make use of Research and Development (R&D) Tax Credits, to help fund vital projects and push the boundaries in their respective industries.

Over the years, we have seen some incredible projects by our clients, you can find a few of them highlighted in our Case Studies and it’s this constant innovations that will help lift us out of recession.

HMRC R&D Tax Credit Statistics: September 2021 – key points

  1. 85,900 claims made

    This is a 16% increase on the previous year!
  2. 76,225 claims made by SME’s

    16% rise on last year.
  3. 9,675 claims made for RDEC ( Research and Development Expenditure Credit )

    A WHOPPING 19% up on last year.
  4. To date, over £47.5bn has been claimed in tax relief

    This is comprised of over 380,000 claims since the schemes launched in 2000-2001.

What can we read from the latest R&D Tax Credit statistics?

More SME’s are claiming R&D Tax Credits

Since HMRC removed the minimum threshold of R&D expenditure that company’s could claim relief on (al the way back in 2012), we have continued to see the number of SME’s claiming the tax relief rising.

The number of SME scheme claims can be broken down as: 38,050 claims which are purely for a deduction from CT liability and 38,175 claims which include a payable tax credit.

72% of claims fall within the cost band of up to £50k

Overall, the general trends are positive. More businesses are accessing R&D Tax Credits, with the lions share of claims that are being made are for values under £50,000. However, (not shown in the graph) the largest concentration in amount, is in the “over £2m” band.

Amount of R&D tax credits claimed by industry sector, 2019-20 (£ million)

The following image shows a detailed breakdown of the industries claiming R&D Tax Credits, along with the overall value of relief being awarded. As with previous years, Manufacturing, Information & Communications (which encompasses computing and software), along with the Professional, Scientific and Technical sectors are making the majority of claims.

How do the different regions of the UK compare?

As we can see from the following image, there is a big difference in the number of claims in each of the UK’s regions. Now, it’s worth noting that this is the location of the registered office and not necessarily where the R&D takes place.

Amount of R&D tax credits claimed by region of company registered address, 2019-20 (£ million)

Research and Development (R&D) Tax Credits are continuing to provide a valuable cash injection to companies within all industries.

As a company, we’re proud of the part that we play in promoting Research and Development Tax Credits and in helping businesses to access this funding.

With the pressure that Covid-19 has placing on businesses, R&D Tax Credits play a real and tangible part in the recovery process. Business owners are clearly seeing (and reaping) the benefit, now more than ever.

Why not contact us today to discuss your business’ R&D tax relief? It only takes our team around 20 minutes to determine if you are eligible or not.

Although most of the Research and Development (R&D) Tax Credit claims that we submit, sail through and are resolved quickly, HMRC have a duty to ensure that they’re applying a consistent and fair process for all so can open an enquiry into submitted R&D Tax Credit claims.

The very nature of R&D Tax Credit claims means that there will be times when HMRC require a bit more information or further explanations, especially in the first couple of claims.

Why do HMRC take a closer look at some R&D tax Credit claims and what happens when they do open an enquiry?

At Fiscale, each claim that we submit on behalf of our clients is extensively researched and written, to remove any ambiguity. As a result, we’re very fortunate to hold an extremely low enquiry rate. However, they do happen. But what does it mean when they do?

The purpose of these enquiries is:

to ensure that the company is in receipt of the correct amount of relief and that it has paid the correct amount of tax

Unlike general enquiries that HMRC can launch, Research & Development (R&D) Tax Credit enquiries tend to focus on their need for additional information or a better understanding of the R&D being claimed for. This is why every report we file ranges between 25-50 pages in length, as our aim is to make the entire process as transparent, easy and as quick as possible. You can find out more about what qualifies as R&D here.

However, it’s inevitable that some Research and Development Tax Credit claims will require a closer inspection from HMRC. We call this process and “enquiry” or a “compliance check“.

Any letter from HMRC can be intimidating for a company to receive, however, we’re here to help you. Whether you’re an existing client or have submitted your claim yourselves or with help from someone else, we will take the lead and work with you to resolve any enquiries to ensure the best possible outcome for you and your business. We will handle all the correspondence with HMRC and if they need to speak to you, we will be present to guide you.

What happens during an HMRC enquiry into a Research and Development (R&D) Tax Credit claim?

The first stage is that you will receive a letter to inform you that they have some questions relating to your claim. At this stage any payments will be placed on hold, pending the outcome. Enquiries usually last around four to five months, however, can sometime take a little longer, or they can be resolved much sooner.

Once their questions have been answered, it’s possible for the enquiry to be closed. Under these circumstances, the R&D Tax Credit claim will be processed as usual. However, in some situations they may like to speak with the “competent professional” who was involved in preparing the claim.

How can Fiscale help during an HMRC enquiry into Research and Development (R&D) Tax Credit claims?

The importance of understanding what HMRC are asking and why, cannot be understated. This is our speciality.

Our whole business model revolves around not only having experts who know the R&D Tax Credit system intimately but also have years of experience in dealing with HMRC enquiries.

It’s a simple idea – we hire the best people to ensure the best possible outcome for you. Our team of experts know exactly what to present and how, to ensure the best possible outcome for our clients.

  1. Step 1.

    We will start by conducting an extensive review of your claim by looking at all documentation and correspondence to date.
  2. Step 2.

    Upon completion of this review we will then be able to advise you on the next step, this often involves us responding to the questions by providing additional information or expanding upon the information relating to a technical uncertainty. This can be completed simply in writing, however, could require face-to-face or telephone discussions – don’t worry, we would do all of this for you, often acting as an “interpreter” to their (sometimes quite technical) questioning.
  3. Step 3.

    Discussions will continue until a satisfactory resolution is reached, in some cases claim numbers will need to be reassessed, in which case we will always achieve the very best result possible for you.

At Fiscale, we do everything that we can to prepare and submit claims that pre-emptively answer all questions and show complete workings for our claim value. This in turn results in less ambiguity when being processed by HMRC.

At Fiscale, we do everything that we can to prepare and submit claims that preemptively answer all questions and show complete workings for your claim value. This in turn results in less ambiguity when being processed by HMRC.

For assistance, please call us

There are still far too many SMEs not benefitting from the R&D Tax Credits scheme

There are a myriad of reasons for this, ranging from a belief that the activities carried out do not constitute Research and Development, to an illogical fear of raising their head above the parapet and capturing the attention of the taxman!

Once a company has acknowledged that R&D Tax Credits might be worth exploring and established eligibility, they are faced with another decision on how to go about making a claim.

How to maximise your R&D Tax Credits claim

When it comes to submitting your claim for R&D Tax Credits you essentially have three choices:

  • Do it yourself
  • Let your accountant do it for you
  • Utilise the services of a specialist R&D Tax Credits consultancy to prepare and submit the claim on your behalf.

We are probably a little biased on this point, but option c) would always be our recommended route and here’s why.

DIY claims for R&D Tax Credit

In our experience the DIY approach always ends up leaving something on the table. No matter how diligent and competent your team, R&D Tax Credits is not your core function. You will know everything there is to know about manufacturing or engineering or software development, but how can you possibly know everything about a highly specialised area of tax?

When companies try to submit their own R&D Tax Credits they inevitably do not maximise the amount of money that they could actually claim; they struggle to meet the deadlines for submission as they have their “day job” to contend with and there is no reporting structure put in place to make future claims easier to process. We have one client who prepared a very good claim which would have meant a tax repayment of £30,000; after involving Fiscale, the claim was nearly doubled. There are other examples.

Delegate to your accountant

Option b) is generally preferable to the DIY approach, however we must reiterate that R&D Tax Credits is a very specialised area. It is unlike most other areas of accountancy and taxation in that it is less about tax and more about your R&D. The numbers is the easy bit, working out what is qualifying R&D and what constitutes a scientific or technological uncertainty are the challenging bits!

Most accountants are well aware of how to calculate R&D Tax Credits but are much less confident with deciding if the activities undertaken by the client are R&D.

Go for the specialist

The fact is, we work alongside many accountants because they realise that this is a niche area. Their clients can gain more benefit by using the services of specialist R&D Tax Credits advisors. We do not compete with accountants as we are not offering those standard accountancy services. All we do is R&D Tax Credits and Patent Box Relief.

One of the major differences between R&D Tax Credits submissions made by an accountant and a submission made by Fiscale often lies in the presentation of the information. Many Accountants will simply make changes to the tax computation, but not provide any information to HMRC, by way of explanation.

Why it pays to show your work

Do you remember being at school in a Maths lesson and the teacher droning on and on about the importance of showing how you arrived at your final answer? Well, it would appear that R&D Tax Credit submissions are a bit like that too!

The Technical Team at Fiscale prides itself on the level of detail that goes into the Disclosure Report submitted to the R&D Unit at HM Customs & Revenue (HMRC). We believe that one of the keys to our success is the way we show, step by step, how we arrived at the final figure presented in the Disclosure Report.

The comprehensive nature of the report removes any guess work for HMRC, they can follow the thought process that we have worked through. This enables HMRC to query a specific element of the claim rather than throwing the whole claim out because they do not understand where the figures came from. Exposing the process allows any issues to be discussed and illustrates that we have applied due diligence. The detailed nature of the report allows us to present a convincing argument to HMRC as to why all the elements of the claim should be accepted.

The report also reduces either the possibility or quantum of any penalties they could charge as a result of any errors in the claim. HMRC can charge penalties if they find an error in a claim. The penalty can be up to a maximum equal to the tax under declared or the value of any losses that have been overstated which could be considerable. Our processes reduce this risk by disclosing every aspect of the claim which can help demonstrate that ‘reasonable care’ has been taken.

Once the Corporation Tax Return CT600 and Discovery Report are submitted to HMRC we deal with any queries on your behalf. It is a painless process!

From what we have seen many accountants will only submit the CT600 with the R&D Tax Credit claim outlined within the form. There is no detailed Disclosure Report – which means that HMRC cannot see the “workings out”. Cast your mind back to that Maths teacher and remember those immortal words “If I can’t see the workings it’s all wrong” – when it comes to R&D Tax Credits the same principle can apply, increasing the chance that the whole claim will be rejected.

If you want to get the maximum amount possible back from your R&D Tax Credits claim use a specialist, use Fiscale. We show all our “workings out” and guarantee no shortcuts and top marks every time!

Call Fiscale Today!

Why not contact us today to discuss your business’ R&D tax relief? It only takes our team around 20 minutes to determine if you are eligible or not.

Luckily, HMRC have purposefully written the legislation to be quite forgiving, meaning that there are many activities that would create eligibility.

What type of activities are considered eligible for R&D Tax Credits?

Since starting Fiscale in February 2014 you would not believe the number of conversations we have had with prospective clients who completely dismissed their eligibility for R & D Tax Credit within the first 30 seconds of talking to them! Of course once we had “scratched below the surface” of what they actually do in 80% of cases it became clear that they were indeed eligible.

Does my business qualify for R&D Tax Credit?

There are really just two questions to answer:

  • Are we producing new or improved products, processes, services or software?
  • Did the design and development of those products involve some uncertainty for which the answers were not obvious?

Here are some examples which help to put R&D into context:

R&D Tax Credits for manufacturing companies.

The manufacturing sector accounted for over 23% of all R&D Tax Credit claims in the 2016-17 tax year. When you consider the scope for creating new and improved products within manufacturing, it is understandable why this sector accounts for the most claims.

With the ongoing trend towards creating bespoke solutions to meet individual needs, along with the constant refining and updating of products, there are huge opportunities for manufacturing companies. As a result, they’re able to capitalise on the benefits of the R&D Tax Credit scheme.

We have worked with a number of manufacturing clients including Icarus Training Systems, the world’s leading supplier of inflatable evacuation slides for training airline cabin crews.

Icarus satisfied the criteria for eligibility as their products are bespoke to the particular client’s specifications. The design and development also involves a degree of technological uncertainty. The variables for each client are unique to that client and the solution that is developed, takes into account the client’s specific training needs, the type of aircraft being used, their training programme and simulator installation.

If you are in manufacturing why not give us a call on 01440 708333 to find out if you are eligible?

R&D Tax Credits for companies within the Information and Communications sector.

Over 25% of claims for R&D Tax Credit, in 2016-17, came from the Information and Communications sector. The creation of bespoke software systems generally satisfies the criteria for R&D Tax Credit claims.

John Mayhew, the founder of Fiscale experienced first-hand, the tremendous value of R&D Tax Credits. Over a four year period John’s business, HET Software, received a total of around £300,000 of R&D Tax Credit funding.

The development of new software is fraught with uncertainty, especially when the developers are pushing the technological boundaries in their quest for user friendliness and integration with other third party software.

HET Software was a market leader in developing software solutions for the domiciliary care market. A highly demanding market sector HET’s clients were looking for a solution that was easy to use (for carers and admin staff alike), highly customisable and secure and delivering a return on investment in as short a timeframe as possible.

The development of new software is fraught with uncertainty, especially when the developers are pushing the technological boundaries in their quest for user friendliness and integration with other third party software.

If your business is software development we are confident that you will qualify for R&D Tax Credits. Call 01440 708333 to find out more.

Call Fiscale Today!

Why not contact us today to discuss your business’ R&D tax relief? It only takes our team around 20 minutes to determine if you are eligible or not.