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R&D tax credits – questions answered

Did you know that many businesses who submit a research and development (R&D) tax credit claim, receive more than £50,000 a year in the form of a cash repayment and/or corporation tax reduction? That represents an incredible boost for any company – and one that many of your clients may be missing out on.

Chris Bridges, author of article and Senior Account Manager at PFP
As a chartered accountant you are focused on offering the most up to date and relevant advice to your clients. However, when it comes to the government's R&D tax credit incentive, it is not always easy to identify which of your clients may be eligible.

How do I know which clients to talk to?

It is important to keep an open mind when it comes to R&D tax credits as R&D activity is often found in the most unlikely of places! 

For instance, PfP Limited recently assisted a client who trades as a wine broker and who had created their own software programme to help their business run more smoothly, and another of their clients is an ex-midwife involved in education and training who created a midwifery stool. They have both subsequently benefitted from a successful R&D tax credit claim and received a vital financial boost to their business.

The R&D claim guidelines set out by the government are deliberately broad and state that 'any business taking a risk by innovating, improving or developing a process, product or service is engaged in R&D activity'. Although intended to be helpful, this broad criteria can make it even more difficult to identify the clients you should be talking to. Here are a few pointers that might help you:

  • It's not rocket science
    Despite many preconceptions, eligible R&D activity is not confined to the laboratory or only undertaken by people in white coats. It can be found in businesses of all sizes, across all industries and sectors – and even in those companies that are yet to make a profit or have made a loss.
  • View the workforce
    The type of people your client employs can help you identify if any R&D work is likely to be taking place. Where highly skilled or qualified workers such as engineers or architects are on the payroll, there is an increased chance that the company will be involved in some innovative work.
  • Look at grants and funding
    If your client has already received grants or funding towards their work, this is an indicator that they might be eligible for R&D tax credits.
  • Keep up with the latest news
    Talk to your clients regularly to get a clear picture of the work they are engaged in and if they are about to embark on any new projects, either for themselves or on behalf of their own clients. As you dig deeper, you might just uncover some innovative work you were not previously aware of that could result in a successful R&D tax credit claim. Sometimes, while the main focus of the business may not be innovative, other work on the periphery is.

You really have nothing to lose by suggesting R&D tax credits to your clients – and they have everything to gain. It is a subject that is getting more attention, so if you do not talk to your clients about R&D tax credits, there is every chance that someone else will.

What’s the next step?

ICAEW (South Wales) is hosting a CPD seminar specifically for accountants on Thursday 7 September in 2 different locations of Cardiff and Carmarthen.

To find out more about what makes an eligible R&D tax credit claim and have the opportunity to discuss your clients’ potential claims with a UK leading expert in R&D, click here.