The R&D tax claims landscape in 2023 and beyond

Hari Sandhu, Founder of FinTech EmpowerRD, shares his perspective on the R&D Tax Claim landscape. What it means for accountants and the ever-increasing complexity of processing a claim.

The importance of the scheme

In 2020 alone, £61.8 billion was spent on R&D in the UK; government incentives like the R&D Tax Scheme, which has been running since 2000, have helped encourage investment in UK innovation and have significantly contributed to the UK economy.

On average, SMEs claim £53,663 in tax back from HMRC, much needed to increase cashflow in an early-stage startup trying to innovate and scale.

Evolving the scheme and the claim process

Lately, there’s been a lot more pressure from HMRC on advisors to step up their game when it comes to the quality of R&D tax credit claims. At the same time, there’s this downward pressure on the fees being charged by advisors.

This situation is forcing advisors to think outside the box and invest in new processes and engagement structures between claimants and advisors. We’ve got to find ways to deliver better results for our clients while keeping costs down. Essentially, the industry is feeling the pressure to up its game, but we also see the value in investing in the right tools and processes.

One noteworthy development from HMRC is the introduction of the additional information form on the Government Gateway from 8th August. This form aims to establish stronger connections between R&D activities and costs, ensuring businesses can substantiate their claims effectively. It also provides HMRC with an opportunity for data collection and analysis to differentiate between good and bad claims.

Surprisingly, this new form may actually improve the quality of submissions as the industry increasingly relies on digital data collection. By leveraging digital tools and systems, businesses can provide more accurate and detailed information, potentially leading to increased government investment in R&D.

While there are concerns and issues to address with HMRC’s forms and formats, the upcoming Research and Development Claims Forum (RDCF) is expected to provide much-needed guidance. However, it may take 6 to 12 months for the changes to settle fully, requiring patience and adjustment.

The standardisation of data collection and sharing with HMRC is a game-changer, as it exposes the practices of advisors and claimants, distinguishing between correct and incorrect approaches. This increased visibility promotes accountability and transparency, safeguarding the integrity of the scheme.

Moreover, this positive development paves the way for investment and changes in the UK R&D landscape. By understanding what works and what doesn’t, opportunities for improvement arise. Advisors and claimants are encouraged to strive for excellence, benefiting all parties involved.

R&D providers embracing technology will be better equipped to handle these reforms. By harnessing technology’s power, they can streamline processes, enhance efficiency, and ensure accuracy in their submissions.

What it means for accountants

The changing landscape also calls for collaboration between accountants and specialist R&D advisors. With the new specialised process implemented by HMRC, both parties must leverage their respective strengths. Accountants bring expertise in financial management and tax compliance, while specialist R&D advisors offer deep knowledge in navigating R&D tax relief intricacies.

Future predictions of the scheme

Looking to the future, a move toward a unified Research and Development Expenditure Credit (RDEC) scheme is anticipated. This consolidation of different schemes under one umbrella aims to simplify the process and make it more accessible for businesses, promoting a cohesive approach.

Furthermore, there may be an increase in relief rates for R&D-intensive companies. As the value of research and innovation gains recognition, the government may offer enhanced incentives to support companies that are pushing the boundaries of R&D.

About the author

Harinder Sandhu, Founder/Executive Chair at EmpowerRD

Hari Sandhu has always had a passion for computing and technology, from studying at Queen Mary University of London, and graduating in 2003 with a Masters of Engineering after completing his degree in Computer Systems and Electronics Engineering.

Hari began his career at Hewlett Packard in Seattle, where he excelled as a Principal Consultant overseeing a large team dedicated to US Federal Regulatory Projects. After 5 successful years, he transitioned to PwC’s London headquarters, where he continued to make significant contributions as a Senior Management Consultant, focusing on Public Sector projects and playing a pivotal role in product innovation.

It was during his tenure at PwC that Hari’s leadership abilities and expertise in government incentives became widely recognised. This recognition led to an invitation to join various HMRC committtees including the R&D Consultative Committee, providing him with invaluable insight into the intricacies of the market.

Motivated by the need for change, Hari came up with the idea of EmpowerRD, which helped to revolutionise the R&D claims landscape, as the first R&D Claims Platform on the market back in 2017. In 6 years so far, he has successfully grown the company into a multimillion-pound business with 1000+ UK customers.

When hes not working Hari enjoys cricket, trekking, and spending time with his family.

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