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R&D tax credit misconceptions revealed

12th Mar 2015
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Clients often don’t think they will qualify for research and development (R&D) tax credits because they don’t own the intellectual property (IP), says Simon Brown, managing director at ForrestBrown.

“In fact, the rules have changed and yes, whilst that was the case in the past, the rules have now changed,” he explained. 

Another misconception the Bristol-based specialist tax consultancy often hears is that clients can’t claim R&D because they received a grant in the past year.

Brown dispelled this myth: “The interconnection between grants and R&D tax credits is complex, but if you look at the details there can be ways to do it. The grant, for example, may have been for another unconnected area of the business.

“There are lots of people out there who either don’t have a great awareness of R&D tax credits or who perhaps have been wrongly advised in the past,” he added.

Prior to setting up his specialist R&D tax firm in 2013, Brown worked at Big Four firms Deloitte and PwC, and more recently worked in a tax consultancy advising entrepreneurs on all aspects of tax.

Looking back over his previous career, he said the mind-set of a client was often focused on a problem which needed resolving. The best he could ever do for the client was to partially or fully resolve that problem.

In his work now, the firm can get tax relief which the client is often unaware they were entitled to. 

“We deliver high quality, efficient work with a typical project timescale around 10 to 12 weeks, but the team are always happy to pull everything out of the bag to hit a tight deadline,” Brown said. 

Working with accountants

To help get over some of the misconceptions and barriers to claiming R&D tax credits, ForrestBrown also works with a small number of accountancy firms to help their clients and free up the accountant’s time.

“It’s about adding value for the accountant,” Brown said.  “For example, an accountant referred his client to us and we were able to successfully claim £500,000 back under R&D tax credits. The client was very happy with their accountant for making the referral. It was positive outcome for the client, the accountant and ourselves.”

According to Brown the key to working with accountants is overcoming the barrier of trust and credibility.

“That will happen over time, there’s a job to do and let’s work together,” he added. 

“You need to set clear parameters at the outset. In our work we need to have a broad knowledge of tax. You need to know the potential knock-on effect in another area. You need that wider tax awareness in order to ask the right questions of the client. We are good at saying no to work. If we are not best placed to carry out work we will not do it.” 

On whether the government’s objective for the R&D tax credit scheme has succeeded in attracting investment in innovation, Brown said the feeling from government was that only a small percentage of companies who can claim R&D tax credits are actually doing so. However he added that there was now more awareness and coverage in the media.

“As more providers enter the R&D marketplace the awareness will rise. My worry is that people may think it’s an easy market to operate in and they may not have the necessary technical expertise, which in turn will lead to bad experiences for clients. We often get asked to help unpick previous problems,” he added.

Replies (4)

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By GuestXXX
17th Mar 2015 18:09

.

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By jaxx789
16th Mar 2015 13:19

Agree with the above. He'll be claiming thats it not just "men in white lab coats" that can claim R&D next.

Perhaps a piece on recent changes just as the rules applying to FOC prototypes or reimbursed expenses coming under HMRC's eye recently would be more beneficial and topical.

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Stephen Quay
By squay
16th Mar 2015 14:16

Misconception

The article was posted by Robert Lovell and not Simon Brown. Robert must have interviewed Simon for his take on the subject and thought it was worth publishing. 

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By Mark_ForrestBrown
16th Mar 2015 14:33

Thanks

Thank you for your comments. While it is correct that some of these restrictions were lifted some years ago, unfortunately many businesses still receive and rely upon outdated advice that, while correct a few years ago, is now certainly no longer valid. 

Some of the 'advice' that companies who contact us have received around R&D tax relief, could be considered anything but, and in many instances this advice can be hugely detrimental.  

Jaxx - there are plenty of topics that we plan to cover in the future, we felt that the interaction between grants and R&D tax relief is one that we so frequently hear horror stories around, that it warranted a post around the topic. As you correctly point out, this can also be said for issues such as the treatment of reimbursed expenses, which is a topic we certainly plan to address in the future. Thanks for your feedback.

Thanks for your comment Squay, and yes it was a topic that we were asked to contribute towards by the AccountingWEB team.  

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