The most common reasons why companies never receive R&D Tax credits

The number of companies claiming under the scheme has grown over the last few years but is still probably under 20% of those that have a valid case and most of them (64%) are situated in SE England.

A very fundamental reason for this low uptake is that many companies have still not heard of the scheme.

It has now been running for over twelve years but still a large number of busy directors have no knowledge or understanding of the scheme.

Another very important reason is where directors are aware of the scheme they don’t believe they are undertaking R&D in their company.

It is often dismissed by senior management as it just does not seem to be anything to do with the activities of the company.

R&D is surely something that only happens in high tech companies based in a science park.

The accountancy profession have also been very wary of this tax entitlement.

There is the accountant's myth of tax investigations if you apply and the dreaded requirement to produce a technical justification which is outside most accountants comfort zone.

Following on from nervous accountants there is the belief that the R&D units are hostile to claimants and out to prevent claims going through.

I am happy to tell you that the HMRC officials are helpful and keen to encourage companies who have valid claims.

In fact later this year they are undertaking a campaign to encourage claimants.

Submitting a claim does not instigate a tax investigation of this I can assure you. I believe this fear stems from HMRC seeking further information regarding the work undertaken by the company in a number of cases.

Certainly not a tax investigation and avoidable if the claim is undertaken correctly

Confusion as to what work might meet the criteria of the scheme is often another major factor in claims never being completed. Often within a company there is disagreement as to whether they are right to submit a claim and where this is the case claims often get kicked into the long grass

Reading the HMRC website is definitely one of the reasons companies take the matter no further.

Despite best efforts the HMRC website is quite a scary place. They talk of “scientific advances”.

It all seems to confirm that this scheme is only for companies where there are men in white coats in laboratories.

Lack of management time is definitely a major factor. With so many other issues to deal with there is a natural tendency to focus on the day to day issues and put off investigating the potential of the scheme.

Finally maybe the belief that the reward will not compensate for the effort required causes claim to be side lined.

There is some very good news. Because you are able to claim up to two years in arrears the average claim in the UK is between £20-30k. This sum would have no tax liability.

Many claims are much larger running to over £100k

If you have a valid claim in one FY there is a very good chance that there will be sums recoverable in every FY in the future

So how can a company overcome these difficulties?

They should seek advice from people who have a good understanding of the scheme.

The first stage is to identify whether your company meets the criteria of the scheme

There does not need to be any cost to this exercise.

A step further is to seek an estimate as to the approximate value of the scheme to your company

Both of these exercises do not need to take up a large amount of time but are usually very illuminating. Typically they would take a few hours of company time

So we would say seek advice from people you are comfortable with.

In most cases it will turn out to be very worthwhile

If you would like to discuss wether you qualify then please call us on 0207 743 6504 or click on the button below to send us an email.