Can Accountancy Firms Themselves Benefit From R&D Tax Credits?
The research and development (R&D) Tax Credits scheme is a government initiative designed to reward UK companies for investing in innovation. Set up in 2000, it allows limited companies that have spent money on building new products, services or processes, or making significant improvements to existing ones, to claim financial support towards the cost.
How much can be claimed?
The R&D Tax Credits scheme offers up to 33p back for every £1 spent on eligible expenditure. It’s offered as a reduction in Corporation Tax for those companies that are profitable, and as a cash lump sum for those making a loss. The exact rate a business will receive depends on their Corporation Tax position and whether it has made a profit or loss. Essentially, the scheme itself is divided into two branches - the SME branch and the Research and Development Expenditure Credit (RDEC) branch.
At this point, you may find a recent blog we wrote for our website on the differences between the SME scheme and RDEC useful.
Over the many years we’ve been in businesses, we’ve helped hundreds of companies secure successful R&D Tax Relief Claims. We have the experience and technical knowhow to determine a company’s eligibility and can help facilitate a fast, hassle-free claim.
So which companies are eligible to claim for R&D Tax Credits - and are accountancy firms themselves excluded from claiming?
This is the good bit! Research and development occurs in everything from engineering and manufacturing to retail, IT, construction and everything in between. And yes, that includes accountancy firms. In fact, the scheme is open to any UK company in any industry providing it meets the following criteria:
- It’s a limited UK company with a liability for Corporation Tax
- It has undergone eligible research and development work
- It has spent money on that work
Applications can be made up to two years from the end of the accounting period during which the R&D expenditure occurred. Claims could be in regard to a very small, one-off project, or a much larger, more involved piece of work costing many thousands of pounds. As long as a scientific or technological uncertainty was addressed - whether the project was a success or not - then R&D Tax Credits could well result.
How can I spot if a specific project is eligible?
We can’t emphasise this strongly enough - it’s not about the type of company, it’s about the scientific and/or technological advancement that a project addresses. If a company is taking a risk by creating or improving a product, process or service, then it will likely be eligible for R&D Tax Credits.
A good test to take is to consider whether the project team faced uncertain outcomes at the beginning of the work. If the answer is yes, then this can cover the element of uncertainty that any R&D tax relief claim must have. If a company can show that their project goes beyond simply applying existing technologies, then a claim is likely - and of course, this includes your own company too.
So back to accounting firms - what innovative new pieces of technology are being developed?
R&D Tax Credits are all about innovation. There are a few big technological advances in the financial sector going on that we believe will continue to transform the way accountancy firms do businesses. Some of the key ones include:
1. Cloud-based accounting
Cloud computing has already been transforming companies from a whole range of sectors. Just like any other businesses, accountancy firms must embrace new technology like cloud computing in order to stay efficient and competitive.
The beauty of cloud-based accounting is that it enables accountants to access financial data from any device, 24/7. They also allow constant collaboration between accountants and clients, offering better service and improved security.
2. More dynamic software
Many accounting firms are already using various pieces of software to reduce operational costs and automate repetitive tasks. Many will need the software to perform a variety of tasks, such as data entry, generating reports, changing the format of financial data and performing tax operations - accurately and efficiently too.
3. Cyber security
It’s thought that cyber attacks cost UK businesses more than £34 billion a year, plus of course the considerable reputational damage they can bring. Data theft, malware and viruses are considered to be some of the biggest threats, particularly for accountancy firms, but still many organisations are lacking the security defences they need.
Various solutions have been developed for accountancy firms to use over recent years, and they will continue to evolve over time. These solutions can protect sensitive client (and business) data, offer improved detection and firewalls, and serve to back up information stored on USB sticks, desktops, mobile devices and laptops.
Why would an accountancy firm need the services of Myriad Associates?
It’s a question we’ve come across many times before. You’re a competent, highly skilled and experienced accountancy firm - why would you need help either with your own or your clients’ R&D Tax Credit claims?
The answer is simple; because applications are complex, time consuming and often stressful. Legislation around applicable costs and how to account for them changes regularly, and there are many grey areas and pitfalls. Not only that, but accidently over-claiming can mean serious bother with HMRC, while under-claiming can mean missing out on potentially thousands of pounds.
So why take the risk?
Myriad Associates specialises in R&D tax relief. This means our team of R&D specialists know the application process inside out, and will work alongside you and/or your client in putting together the most accurate, highly optimised claim possible. We will also deal with any HMRC issues, as well as answer any questions - leaving you to get on with everything else.
Interested in finding out how your accountancy firm can work alongside us in offering a more complete R&D tax credits service? Perhaps your own team has recently undergone an R&D project and you’d like to claim yourself?
Get in touch today - we’d love to hear from you. Call us on 0207 118 6045 or use our contact form. We're working as usual throughout the pandemic and will get back to you as soon as possible.