Four ways to make a stronger R&D tax claim

Harinder Sandhu, July 6, 2021 3 min read

This article was sponsored by EmpowerRD

You’re sure to be familiar with the UK R&D tax credit scheme – a government tax incentive for innovative businesses, providing a non-dilutive cash injection to support scientific and technological advances. Startups claim on average £53,876 and, in London, this figure rises to £81,000.

The scheme is at the heart of the Government’s vision for post-Covid economic recovery, with a new £375m fund being launched for fast-growing businesses, and an aim to raise total investment in R&D to 2.4% of UK GDP by 2027. 

Though the scheme itself is designed to reward the best of British innovation, the claim process has long been lacking advancement.  We look at four ways that growing businesses can use technology to make their claims stronger.

1. Take back control from traditional advisors

Applying for R&D tax credits has relied on advisors sitting at the centre of the process. Advisors use traditional methods such as interviews to capture the data needed for the claim, but they often overcomplicate the process to justify their high fees.

Today, a chief finance officer wouldn’t dream of closing their books without a combination of a skilled finance team and a modern finance platform, so it’s surprising how little supporting technology has so far been introduced into the R&D claiming process.

Transitioning to a technology platform enables businesses to take control of their R&D claim without overreliance on third-parties. Ultimately, technology can get a business to a point of self-sufficiency by providing the tools, education and transparency to fully manage the claims process. Businesses should be working towards spending less each year on claiming, not more as they grow.

2. Benchmark against aggregated and peer data

An R&D tax credit payout is a major event for any growing business, but it’s difficult to know whether the claim really was the best it could be. Was your claim the right size for a business like yours, at your current stage?

A technology platform can help you answer these questions, providing extra information by systematically aggregating and comparing data across companies. Seasoned experts can take that, review the information, draft a claim and benchmark it both at the line item level and in aggregate to compare to relevant peers. This is simply not possible with even the most experienced “industry veteran” traditional advisor. A specialist R&D platform can access aggregated and anonymised data from users to benchmark a business against other companies, ensuring each business optimises their claim and receives the credit they are due. For example, at EmpowerRD we retrospectively evaluated Bloom&Wild’s claim and increased the credit they received from HMRC by 290%.

3. Ensure the innovators themselves contribute to the claim process

HMRC are introducing stricter compliance measures this year in a bid to crack down on fraudulent claims, which means companies will need to dig even deeper to identify, capture and record their supporting evidence. 

It’s crucial that employees who have worked on the R&D projects – i.e. the innovators doing the innovating – contribute directly to the claim process to make the strongest case. But the traditional process of interviewing the tech team soon becomes a laborious project to manage as your team expands and projects become more complex. Tech means that effort remains low despite how complex your claim is. Your whole team can collaborate on the claim to optimise it with the appropriate level of detail which will withstand any scrutiny from HMRC.

Our client Birdie switched from their previous provider as the business and their investment in R&D grew, and their projects became more complex. The right technology allowed their team of 10 engineers to work collectively on the claim, and build out the details in a more time-efficient way.

4. Collect data on an ongoing basis, while the project is fresh

A final benefit of using a platform is that it also allows businesses to build their claim throughout the year. Birdie also does this, collecting data on an ongoing basis whilst the project details are still fresh in the minds of the engineering team, thus further improving the quality of the claim.

Technology can greatly improve the experience of claiming for companies as they grow. The process is far more transparent, and allows the use of data to ensure a claim is benchmarked and optimised year on year. It also reduces the time and effort taken to put together a claim – with multiple team members able to work simultaneously on the necessary details – which ultimately significantly lowers the cost.

EmpowerRD guides startups through the process of making an R&D tax credit claim, helping them unlock the full value of their claim, for a fraction of the cost of traditional providers. By combining a team of expert advisors with an industry-leading platform, EmpowerRD makes the claiming process more reliable, time-efficient and cost-effective for innovative businesses.

Speak with one of our team for a no obligation consultation. 

If you’re entirely new to the R&D tax credit scheme, read our full ‘Introduction to R&D Tax Credits’ guide over on the EmpowerRD website.

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