Many people in the R&D Tax Credit advisory field are increasingly sensing that something just doesn’t stack up.
The last couple of years has seen the emergence of several “semi-automated” R&D Tax Credit advisory firms whose crusade is to disrupt the R&D Tax Credit market by getting rid of “slow, inefficient, and expensive consultants” with their old-fashioned, time-consuming methods of collecting data and conducting actual face-to-face interviews with R&D claimants.
Instead, these firms maintain that this can all be achieved through “technology” and declare their companies to be “Fintech disrupters” rather than traditional consultancies.
Cutting through the marketing hype, one intriguing assertion made by some of these companies is that they offer a huge time saving over traditional advisors – to quote one claims advisor: “the time you spend on your R&D claim is now more appropriately measured in MINUTES, not hours or days”.
In an article titled “Startups: stop wasting time with R&D consultants”, the CEO of this firm proclaims that “the most painful part of [the claims process] was the precious time the traditional claims advisors needed from the very expensive CTO/tech lead”.
He goes on to describe his previous experience of using the old-fashioned type of advisor – where the CTO and his team “ended up having more than an hour of calls” – as a “waste of his CTO’s time”.
So how can it be, when HRMC is now requiring more detail and more evidence of the qualifying nature of the R&D, that some R&D advisors are maintaining that their technology makes the process so simple that it only requires “minutes” of their CTO’s time?
To be clear, there can be enormous benefit in reducing the time and effort involved in the collection of financial and company data and using technology that integrates with systems such as Xero is clearly beneficial to all parties.
Likewise, online portals that provide claimants with the latest status of the claim preparation is exceptionally valuable. Having a rules-based system that helps prevent the possibility of basis errors, such as in the area of subcontracting, is also something to be welcomed.
But only requiring the CTO for “minutes” Really?
This pitch is remarkably seductive for busy founders and it does sound logical that technology should make filing an R&D Tax Credit claim quicker, easier and “cheaper”.
Superficially the idea that an R&D claim can be automated is plausible as more entrepreneurs rush to build platforms in many diverse sectors.
Even some consultancy-led R&D advisors have got in on the act by creating their own self-service platforms for low value claims that run alongside their existing services which are targeted at the more complex claims.
However, you cannot automate the production of a technical report.
It is just not possible to talk to a CTO for “minutes” and then use the basis of this discussion to write a robust and detailed technical report.
A comprehensive technical report, clearly defining the technical advance and technical uncertainties to be resolved is now more important than ever. Having virtually no interaction with the claimant’s CTO, these self-styled Fintech products cannot provide the key element of expert technical consultancy that ensures a fully compliant R&D claim.
According to Dr Adrian Vonsovici, PhD physicist and R&D claims expert at MSC R&D:
“Correctly establishing the critical aspects of an R&D claim is not simple and needs full human intervention.
The promise that some companies are making – that they have a very simple, highly efficient and very quick claim process, best-in-class and minimally invasive – is the Holy Grail of any consultancy field, not just R&D for Tax Credits.
“In practice, things are more complicated. The key is in the interplay of both the technical and financial analysts’ skills in extracting and analysing the relevant data. For that to happen, it is essential to establish a correct rapport with the technical and financial staff [in the claimant company]
Computer scientist at MSC R&D, Dr Derek Marriott argues tellingly that “if the CTO doesn’t have time for a couple of hours to talk then you’ve probably got bigger problems”.
So why do some R&D advisors persist with the message that they have somehow developed a short-cut process to building totally compliant R&D Tax Credits claims?
Or, more importantly, why did they so easily get the funding to build their proposition and are things about to change?
More to come in our next article.
Thanks to Rufus Meakin – MSC R&D Sales Associate and specialist in large R&D Tax Credit claims; Industry-leading seller of R&D Tax Credits since 2005.
Read Rufus’s full article
