Given the R&D Tax Credit Programme has been around for over 25 years, most companies know of the programme and in general are able to determine when they are not getting good service or proper advice from their R&D tax credit service service provider (“service provider”). W,hich is required to submit a strong claim and minimise the chance for an HMRC enquiry.  One of the primary reasons companies are now selective with service providers also plays a role in tightening rules and new statistics recently released by HMRC.  The approximate number of claimants has been reduced from 80,000 to 40,000 annually. 

HMRC stated a few years ago that they believed approximately 50% of all SME R&D Tax Credit claims were in error. In the 2020-2021 period the volume of SME R&D tax credit claims filed was over 75,000. In 2023-2024 this amount is now 36,885.

It appears that through increased compliance checks and the requirement to file an “additional information form”. The number of SME’s filing R&D tax credit claims is substantially reducing so HMRC is achieving its goal to reduce claims filed in error.

The 2023-2024 period is the first year where we see the impact of the substantially reduced R&D tax credit rates for SMEs in the programme. We expect this trend of decreasing SME R&D Tax Credit filings to continue to the next period. As the newly merged RDEC scheme came into effect for accounting periods commencing after 1 April 2024.

What feedback RDP has received

Because of all of this, it has put companies, regardless of whether they are considered a startup, small or established SME or large, on edge as to which service provider they want to work with. When speaking with companies, I have received a lot of feedback about why they elect to change service providers and more often than not, the 3 reasons below are the ones that arise most:

1. Present Adviser’s R&D Claim Process is Outdated or No Longer Considered Good

Companies are asking themselves now does a “specialist” service provider ask you what you believe is eligible?  Does the service provider prepare the supporting documentation?  Should an enquiry result, do the services involve defending the claim?

If the answer to one of these questions is no, a company will normally explore its options and generally make a change to their service provider.  They are looking for that comfortability and continuity with a service provider to ensure they are proficient with R&D tax law, its practices and whether they make ongoing changes to their R&D claim processes, in addition to ensuring a service provider does not take a lot of the company’s time in preparing the claim.

2. What industry experience do they have?

R&D tax credits are about applying the tax rules to a specific industry. Companies generally want to know that the service provider they choose has experienced technology professionals who can advise eligibility at an R&D project level in order to understand and communicate to you the eligibility criteria.

Whether a company is involved with AI, fintech, engineering or manufacturing, each of these industries have nuances that a good service provider is required to know about and, companies know it is important to think about how a service provider will be able to recognize and advise the technological advances as well asking the right questions to confirm uncertainties also existed within a given R&D project(s). The question companies may ask themselves is whether their present service provider understands what they do?

HMRC penalties are another reason why a lot of companies will want to switch service providers.  Service providers are not responsible for penalties that may arise from the submission of an R&D claim so changing to a service provider that understands what a company does on a technical basis is of the upmost importance. To ensure they are able to classify and submit an R&D project / activity that is not considered non R&D or routine.

3. Pricing

Often, a company may find that they are being overcharged by their service provider, especially if their existing service provider does meet the criteria in points 1 and 2 mentioned above. In general, if a good service provider limits your time to less than a few hours (assuming you are a small SME or with less 3 than R&D projects), understands the R&D criteria, has a good R&D claim process that constantly evolves and issues a reasonable no win / no fee arrangement, companies will make the switch.  If a company is still paying somewhere between 25%-33% for their service provider, there is more than enough competition in the marketplace that offers the same if not better services for less.

Choosing an R&D Tax Credit Service Provider

For the last 35 years, RDP Associates has supported companies worldwide with innovation through R&D tax credits and government funding. Irrespective of your size or industry, we are committed to ensuring that your R&D claim is maximised, and you are in the best position to thrive to reinvent/reinvest the tax benefits received back into your company.

As we have said multiple times, we are in a unique position when it comes to our local or even regional competition that only services the UK.  Since we service companies in 5 countries worldwide, the UK eligibility was adopted verbatim from Canada, 1 of the countries that we provide R&D tax credit services to its clients. However, in this case, the Canadian R&D programme has been in existence since the early 1980s and because of this, we have seen a very similar timeline of events evolving that took place 10-15 years ago.  This puts RDP in a good position to assist our UK clients on what to expect, as we see history repeating itself with the UK R&D programme.

If you have any questions on why companies switch R&D providers, please do not hesitate to contact Jenni at [email protected].