Given the potential for substantial financial benefits, why are so many accountants keeping schtum about R&D tax credits? As a business owner, you rely on your accountant for sound financial advice, so not mentioning R&D Tax Credits could cost you. There may be many reasons why your accountant has failed to mention the value R&D Credits could bring to your business. And while this oversight may not be malicious – it is potentially very expensive. So let’s dive into some common reasons accountants fail to mention R&D Tax Credits.
Limited Awareness
R&D tax credits are a niche area within the broad spectrum of tax principles. It requires more than just a cursory knowledge of tax laws—it demands a deep dive into the specifics of what makes an activity eligible for credit and how to effectively document and claim this relief. Many accountants, especially those whose practices don’t regularly work with industries where R&D is prevalent, may not have a deep understanding of how to identify eligible R&D activities or navigate the intricate process of claiming these credits. Without this specialised knowledge, there’s a risk that you might not benefit from the tax relief you are entitled to, or worse, you might face challenges from tax authorities if claims are not properly substantiated.
Focus on Core Services
For many accountants, their primary focus is providing essential services such as bookkeeping and filing tax returns. Given the time-consuming nature of R&D tax credit claims, your accountant might not promote R&D tax relief because it’s outside their specialisation. Dedicating the time to develop expertise in R&D tax credits can be challenging for accountants primarily engaged in general accounting work. The investment in learning and staying updated on the relevant laws and practices may not align with their business model or client base’s needs.
Client Profile Mismatch
If your accountant typically services industries less involved in qualifying R&D activities, they might not consider the relevance of R&D tax credits for your business. This is particularly true if they mainly work with sectors like retail, where R&D is less apparent. In industries where R&D is less apparent or traditionally recognised, significant R&D activities may still occur, especially with the evolution of technology and business practices. However, if an accountant is not attuned to identifying these activities within the context of sectors they perceive as non-R&D intensive, the opportunity to claim R&D tax credits can easily be overlooked.
Misconception About Your Business
Recognising eligibility for R&D tax credits requires a detailed understanding of your business’s projects, including the technical challenges, innovative solutions, and advancements in knowledge or capability being sought. It involves moving beyond the financial statements to understand the story behind the numbers: what projects were undertaken, why they were necessary, and how they were executed. Without delving into these specifics, your accountant may not recognise activities that could potentially qualify for R&D tax credits. This oversight can stem from a lack of structured inquiry into your operations or reliance on generic information gathering that can fail to capture the essence of your R&D efforts.
Assumption of Ineligibility
Many businesses and their accountants fall into the common trap of assuming they are not eligible for R&D tax credits. This is often rooted in a narrow definition of research and development and a general lack of awareness about the broad eligibility criteria. R&D tax credits are designed to support diverse activities across various industries, not just those traditionally associated with scientific research. The complexity of the legislation and an underestimation of your innovative efforts lead many accountants to conclude your activities don’t qualify, potentially missing out on substantial financial benefits.
Perceived Complexity
Man accountants consider R&D claims process as overly complex or burdensome, and for those with a limited understanding, it can be. The intricate nature of R&D tax credit claims, from calculations to documentation, means understanding the nuances of tax law interpretations takes years of experience and training. For accountants who don’t specialise in R&D the prospect of undertaking a claim can be daunting. This apprehension often means they aren’t willing to engage with R&D tax credits, under the belief that the process will be too resource-intensive, potentially detracting from their other clients and responsibilities.
Risk Aversion
Engaging with HMRC over R&D tax credits involves a high level of scrutiny and does open your business’s filings up to a level of examination that goes beyond standard tax submissions. HMRC reserves the right to audit claims to ensure compliance with the specific criteria for R&D activities and expenditures. Some accountants might worry about this extra scrutiny leading to audits or difficult questions, so they tend to play it safe. While being careful is generally a good thing in finance, being too cautious can mean your business can miss out on tax credits you’re entitled to. Many accountants err on the side of caution to the point of neglecting viable avenues for significant tax savings through R&D tax credits.
Work with an R&D Tax Specialist you can Trust
If your accountant’s R&D tax credit expertise is lacking, exploring specialist services could be worth thousands, or even millions depending on the types of R&D projects you undertake. As qualified R&D tax advisors, Wilby Jones R&D Consultants can give you tailored guidance and support to navigate your claim process effectively. Speak to our team today and see what you could gain.
