R&D Tax Credits: Consultants vs. DIY

R&D tax credits are a way for the UK government to reward small and medium-sized businesses and research and development entities for their innovative work in science and technology. The government recognises that technological innovation plays a vital role in the long-term growth and prosperity of the nation. To encourage companies to invest in research and development, it has introduced R&D tax credits, which are managed by the government institution called HMRC. HMRC sets strict criteria to determine if a company's work qualifies, and if it does, the company receives a credit.

A valid claim benefits both the company and the government. On one hand, the government can invest in research and development and support innovation. On the other hand, it improves the company's cash flow by reducing the amount of taxes it has to pay. Additionally, it encourages companies to become more profitable by promoting new, improved, and innovative solutions and encouraging further investment in R&D activities.

In this article, we will discuss the choice between hiring consultants or taking a do-it-yourself (DIY) approach when claiming R&D tax credits. This decision can be challenging as it requires a significant investment of time and money, but this article will help you make the best choice based on your company's situation.

Understanding R&D Tax Credits Eligibility

To qualify for R&D tax credits, companies need to make advancements in science or technology that go beyond what's currently available in their industry. The criteria set by HMRC are flexible and easy to understand, and you can find more details on HMRC's official website [here](insert link). Let's simplify it further to ensure there's no confusion when applying for R&D tax credits. A project is considered an advancement if it meets one of the following criteria:

1. Pushing Boundaries: It pushes the limits of knowledge or capability in a specific field of science or technology.
2. Creating Something New: It results in something new, like a process, material, device, product, or service, that represents a significant improvement in knowledge or capability in a field of science or technology.
3. Significant Improvement: It makes a notable improvement in something that already exists, such as a process, material, device, product, or service, through the use of science or technology.
4. Innovative Approach: It uses science or technology to create something similar to an existing process, material, device, product, or service, but in a new or much better way. For example, a product that performs just as well as existing ones but is made using completely different methods.
5. Uncertainties: It involves scientific or technological uncertainties that are not easily figured out, and even competent professionals didn't know how to achieve them in practice. For each technological uncertainty, there must be a corresponding R&D activity to overcome the challenge.

Pros and Cons of Hiring Consultants

When deciding whether to engage consultants for your R&D tax claims, it's important to consider the advantages and disadvantages to make the right choice for your company. Let's start by exploring the benefits before examining the drawbacks.

Pros of Hiring Consultants:

One significant advantage of hiring consultants is their technical expertise. They typically possess diverse technical backgrounds, knowledge, and experience that can be applied to your R&D tax claim. Consultants, like those at Myriad Associates, offer an end-to-end service, taking full responsibility for your claim. From gathering project information to submitting it to HMRC, they ensure that your projects align with HMRC's criteria for successful qualification. If your project doesn't meet the criteria, consultants provide an expert review, offering a detailed explanation for non-qualification, which can help you avoid potential issues in future claims. Additionally, consultants understand how to present your projects to HMRC efficiently. They can identify eligible activities, including those indirectly related to R&D, and manage the entire process on your behalf. This approach saves you time and maintains a consistent cash flow into your business.

Cons of Hiring Consultants:

However, there are some potential drawbacks to consider when hiring consultants. Choosing the right consulting company can be challenging, as many vendors offer similar services. Ensuring authenticity and reliability is crucial. Accurate information transmission to HMRC is essential, as mistakes can lead to objections and claim rejection, even if your work qualifies. To mitigate this risk, researching a consultant's background, expertise, and case studies can be beneficial. Dependency on external experts can be another concern, as they handle multiple claims simultaneously. Overpromising and missed deadlines for claim submission can occur. Assessing a consultant's reliability through client reviews and testimonials is essential. Finally, sharing sensitive project information, whether financial or technical, raises confidentiality concerns. To establish trust, it's advisable to work with reputable companies that have experience with well-known clients.

In summary, hiring consultants offers several advantages, including technical expertise, end-to-end service, expert review, efficient processes, and time savings. However, it's essential to carefully select a reliable consultant and verify their track record through case studies, client reviews, and client testimonials to mitigate potential drawbacks.

Pros and Cons of the DIY Approach

Now, let's explore the advantages and disadvantages of taking the DIY approach to your R&D tax claims, starting with the pros before examining the cons.

Pros of the DIY Approach:

One significant advantage of the DIY approach is cost savings. Managing the claim internally allows you to retain the budget that would have otherwise been paid to third-party consultants. This saved money can be reinvested in further R&D work or other operational aspects of your business. Additionally, managing the process in-house provides complete control. You have the flexibility to expedite the process for tight deadlines or delay it when more project information is needed. With the DIY approach, you are the master of your claim, and everything remains under your control. Furthermore, it presents a valuable learning experience for your team. While the first claim may pose challenges, the process becomes more streamlined as your team becomes familiar with it.

Cons of the DIY Approach:

However, there are some potential drawbacks to consider when opting for the DIY approach. Firstly, despite the process appearing straightforward, it is highly complex. You must gather precise information about your R&D work and its corresponding financial details for presentation to HMRC. Even a single discrepancy can raise questions and potentially nullify your claim. Secondly, managing the claim internally can be time-consuming and tedious, necessitating a dedicated team. If a team member leaves the company, finding and training a replacement to meet HMRC's criteria can be challenging and may cause delays. Lastly, there is a higher risk of errors when handling claims internally due to the process's inherent complexities. These mistakes can lead to claim rejections, even if your R&D work qualifies, but it wasn't presented correctly to HMRC.

In summary, the DIY approach offers cost savings, control over the process, and a valuable learning experience for your team. However, it comes with complexities, potential time constraints, a heightened risk of errors, and the need for a dedicated team. Careful consideration of these factors is essential before deciding to manage claims internally.

Considerations for Choosing the Right Strategy

Choosing the right strategy for your claim submission can vary depending on your specific circumstances, and there's no one-size-fits-all answer. However, several considerations can be immensely helpful in making this decision.

For Self-Handling (DIY):

1. In-House Experience: If your company has years of experience with R&D activities and a consistent team that understands the intricacies of both the work and the claim process, self-handling might be a safer choice.
2. Team Confidence: If you are highly confident in your team's ability to balance R&D activities with claim handling without neglecting either, managing the claim internally can provide you with greater control and cost savings.

For Hiring Consultants:

1. SME or RDEC Company: If your company operates in the SME or RDEC category and focuses on providing services or handling operational work, handling the claim internally is generally not recommended. The claim process demands careful attention, and a small oversight can result in significant financial losses.
2. Cost-Benefit Analysis: It's advisable to conduct a cost-benefit analysis comparing the potential refund from HMRC with the fees charged by external consultants. In most cases, the refund amount is greater than the consultant's fees, making it a financially rewarding choice.
3. Consultant Reputation: When opting for external consultants, ensure you choose a reputable and trustworthy organisation to handle your claim.

While there is no universal answer, it is generally preferable to hire consultants for successful R&D tax claim submissions. The potential refund from HMRC is typically greater than the cost of hiring external experts. However, the choice should be made carefully, and a reliable and well-established organisation should be selected to handle your claim effectively. If you are looking for such a consultant, you can explore Myriad Associates.

Case Studies

Myriad Associates has a track record of successful claims, catering to a wide range of businesses, from large corporations to small organisations. To gain insights into their success stories and discover how Myriad Associates can add value to your business, you can explore their case studies here. These case studies showcase the diverse range of companies that have benefited from their expertise in R&D tax claims.

The Dilemma

In the world of R&D tax credits, the choice between hiring consultants or taking the DIY approach is a decision that should be carefully considered. Both strategies have their pros and cons, and the right choice depends on various factors unique to your company.

When it comes to DIY, it offers cost savings, control over the process, and a valuable learning experience for your team. However, the complexity of the process, the potential for time-consuming tasks, and the higher risk of errors should not be underestimated. On the other hand, hiring consultants can provide expertise, ensure a streamlined process, and reduce the risk of errors. They can handle everything from project information gathering to claim submission and follow-up, relieving your team of this burden. However, choosing the right consultant is crucial, as reliability and trustworthiness are paramount.

In conclusion, the decision between consultants and the DIY approach is a significant one. Careful consideration of your team's expertise, the complexity of the claim process, and the potential financial benefits should guide your choice. Whether you decide to go it alone or enlist the help of experts, the goal remains the same: to leverage R&D tax credits to boost your innovation and business growth.

Why choose Myriad Associates to help with your R&D tax claim?

Myriad Associates has been managing R&D Tax Credit claims for nearly two decades, assisting a broad range of companies up and down the country. No matter what size or sector your company is in, we can help.

We understand how important R&D Tax Credits are, both to individual companies and the wider economy as a whole. However, because the government is keen to maintain the scheme’s success, they often update the rules and regulations around these R&D tax schemes, which can get confusing. This is where we come in.

The expert team of R&D tax advisors here at Myriad Associates apply a unique methodology when navigating through the complexities of the R&D tax claims process. To secure the R&D tax relief you're eligible for, we maintain a holistic approach.

First, we’ll work to understand the technical and scientific uncertainties your project faced in order to ensure we meet HMRC's strict R&D tax credits criteria.  Then, we’ll use that information to build a robust technical report, collate all the relevant costs and calculate the benefit owed for inclusion in your company’s tax return.

We’ll also happily handle any enquiries from HMRC should they arise. The claims criteria can be difficult to understand and so enquiries are becoming a more regular occurrence as HMRC works hard to tackle abuse of the scheme.

Whatever stage you’re at in your claim for R&D Tax Credits, simply contact us on 0207 118 6045 or use our contact page.

Whether you need full support from start to finish or simply have a quick question, we’re here to help.

Do you need help with an HMRC enquiry?

Has your R&D tax relief claim attracted the attention of HMRC? Don’t panic.

Enquiries into R&D tax relief claims by HMRC are on the rise. Our highly-qualified team will provide the utmost support to secure a beneficial resolution for your HMRC R&D enquiry, so that you can rest assured knowing your business is in safe hands.

We are well equipped to offer actionable advice on any R&D tax relief enquiries made by HMRC as well as provide proactive reviews that can help ensure complete peace of mind during these uncertain times.

If you’ve been contacted by HMRC about your R&D Tax Credit claim, or you’d simply like to know more, please do get in touch using our contact form or call our friendly team on 0207 118 6045.