Your tech startup has a Development Roadmap a mile long. The Sales Team is demanding more features; Customer Services are complaining that existing features don’t work. Who has time to think about Tax Credits?
Well, you should!
I was co-founder, COO and CTO of a tech start-up for 18 years. I used to resent having to do R&D Tax Credits each year – specifically, preparing for the 1 hour conversation with our chosen specialist tax advisor. What made the task so taxing was that I had to:
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recall what we had done during the period 1-2 years ago,
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distill this work into technical advances, and then
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explain to the advisor, who does not do what I do every day:
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my business more than a year ago,
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the business advantages we wanted to achieve, and then ,
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the technical problems we encountered trying to achieve those advantages – both during concept/planning and during implementation.
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As one Claridian client recently said to me:
“ I am working in the present. I don't have time to live in the past. ”
1. Recruit Top Notch Staff
One brilliant coder is worth a large team on mediocre ones. Development is faster. The code is better – more efficient, bug-free, and easier to maintain.
But, how do you secure the best talent? Have something to brag about.
The core of an R&D Tax Credit claim is bragging about your innovations. Because HMRC is non-technical, you need to explain your brilliance in simple terms. First, the process helps you fine-tune the words. Second, the money is external validation that what you are doing is cutting-edge. And, third, having filed R&D Tax claims for over 20 years, it is amazing how much brilliance you forget. Going through the process of discussing what you have achieved reminds you of the triumphs along the way.
2. Win Budget Arguments
The Technical Department is viewed as a cost centre, and so everyone else wants to keep your costs down. But, R&D Tax Credits give you back 1/3 of whatever was spent on innovation – reducing your costs substantially. That means you can either do 50% more with the same budget, or put cash in the bank when it is tight.
Instead of pruning back your feature list, double down on being cutting-edge and get paid for doing so.
3. Give Sales something to Brag About
Product Differentiation is as much about perception as reality. YOU know your product is better than your competitors, but how can you prove it?
A successful R&D Tax Credit claim proves that your work is innovative – your features are cutting edge. Look at it this way. HMRC really hates giving out money. If they pay you for your innovation, that means something.
4. Get the Credit for Tax Credits
R&D Tax Credits are not a secret. At a certain size, your Finance Team is going to insist on it. But, importantly, you have to do most of the work. You have to articulate your innovation and justify it to HMRC. Once you have sketched out what activities were cutting edge, the work of Finance is straightforward.
Remember that R&D Tax Credits are very generous – up to 1/3 of the amount spent.
Why let Finance take credit for “finding” R&D Tax Credit money when you are going to do most of the work to get the money anyway.
5. Take Control of the Process
Wrapping your head around HMRC’s requirements can require considerable mental gymnastics. If your company is large enough, it may make sense to hire specialist R&D advisors. These advisors, however, work on a commission basis – a percentage of the claim. If you have less than £50k of qualifying expenditure, you would be lucky to attract any specialists. And any you do attract might pressure you to move quickly and broaden your claim perhaps in ways that are not entirely reasonable.
Up until now, the only alternative has been Do-It-Yourself claims. Although possible, this is a difficult journey. This is why HMRC rejects 78% of DIY claims because they are inaccurate, incomplete, or non-compliant.
You now have a third option, Claridian. Our patient, insightful AI robot has been trained on HMRC’s requirements. It has two tasks: to educate you on the requirements of R&D Tax Credits, and elicit from you sufficient details of your innovation to satisfy those requirements.
Once it has done its work, it prints out your version of the Additional Information form that helps you explain your innovation to HMRC, in terms they understand and can approve. And, after being guided to input a few numbers, it prints out a completed CT600L for you to submit with your Corporation Taxes.
If you pay Corporation Tax, you receive payment immediately – because you simply deduct the R&D benefit from your tax bill. If you do not yet pay Corporation Tax, HMRC will send you a cheque after they have checked your claim.