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Markel Tax

29 Jul 2020

My clients don’t do R&D, are you sure?

R&D Tax Relief and your clients – dismiss it at your peril!

From the point at which the UK went into lockdown due to Covid-19 in March of this year to the time of writing, we here at Markel Tax have claimed in excess of £10.6 million for our R&D clients. These companies have rightfully received tax benefits in the form of:

  • Cash repayments for corporation tax refunds,

  • Reductions in corporation tax liabilities, or

  • Surrendered losses in exchange for tax credits payable

These claims have created valuable cash-flow injections, and provided our clients with options in a time of unprecedented global disruption and confusion. It is scarcely credible then that fewer than 55,000 R&D claims are submitted in the UK each year. This in turn is a clear illustration that a substantial number of UK businesses are missing out on thousands of pounds in corporation tax relief for which they are eligible.

At Markel Tax, we have over fifteen years’ experience within the tax initiatives and reliefs sector, and we consider it our professional duty to offer the most relevant and up-to-date advice to our clients and referral partners alike. At a time when UK companies need as much support as they can get, why are so many of them not claiming the generous entitlement which is R&D tax relief?

There are several contributing factors to this apathy. For a start, the term R&D can in itself be misleading and is frequently misunderstood. Perhaps a more appropriate title might be ‘ Business Development Tax Relief’ or ‘Commercial Development Tax Relief ‘, as these terms would have more resonance with the majority of business owners.

Our experience of working with a wide range of companies across many industry sectors has shown us that the areas which contribute to the low take-up of R&D within businesses are:

  • A lack of knowledge relating to qualifying projects which constitute R&D activity

  • A misconception that the process of claiming R&D tax relief will be time consuming

  • Scepticism towards HMRC’s acceptance of such claims

HMRC’s approach to genuine R&D tax relief claims is in fact a positive and welcoming one. Since the onset of the Covid crisis, HMRC has demonstrated its commitment to R&D tax relief, and has redeployed additional resources to its R&D team. Furthermore, HMRC has pledged to process 95% of all claims within 28 days of receipt - including submissions both for the SME scheme and for the  RDEC scheme for large companies. In addition, a late submissions team has been created – this is a group directly responsible for ensuring any claims that have not been processed within the pledged turnaround time are prioritised to ensure prompt payment to companies where appropriate.

We are also seeing a number of businesses shortening their accounting periods to source immediate funds via the R&D tax regime – this is seen as acceptable practice, and is worthy of consideration if cash-flow is a concern.

Undoubtedly, there will be businesses which will thrive during these uncertain times, others who will survive by battening down the hatches, or perhaps diversify resources and adapt their business to meet new market demands – we have seen all of these within our client base to date. However, sadly some businesses will not make the transition to the post Covid-19 environment, and a fundamental indicator of this resilience will be the ability to financially support sustainability. Companies will need to implement changes required to their business models, including adapting products and processes in order to harness opportunities to secure future growth and mid- to long- term survival.

This resilience can take many forms, and one option we would urge all advisers to touch upon with their clients is the potential benefit of making an R&D claim. Although the number of R&D claims made in the UK is rising year on year, many business owners either dismiss R&D as not for them, or erroneously maintain that their commercial activities do not involve research and development. Ironically, many directors and shareholders believe their R&D activity is simply business as usual, and it is not uncommon for us to meet with companies who are unknowingly fulfilling all the qualifying criteria for R&D relief – that is to say, they are continually developing products or processes which meet the demand of an ever evolving market, or simply responding to a customer request to develop or enhance an existing product.

At Markel Tax, we have always believed that through our partnerships with accountancy firms we can offer your clients confidence and reassurance in the R&D process. The fact that we work in partnership with you to prepare and maximise our claims provides a certainty for both you and your clients. We are committed to making valid and robust R&D claims, which can withstand HMRC scrutiny. This approach is reinforced through our close working relationships with advisers and clients alike.

Identifying the full potential value of R&D activity across a business and undertaking a claim can be complex to navigate. However at Markel Tax we successfully submit over 750 claims a year. This is made possible by a team of highly experienced in-house technical consultants with science and technology backgrounds covering a large number of sectors. The team is widely qualified, with many staff holding PhDs and degrees across a range of sectors, along with our finance professionals with CTA, ATT, ACA  and other accounting/tax qualifications.

To discuss your potential R&D claim, please contact Justine Dignam by email or call Markel Tax on 0333 920 5708.

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