It is fair to say that when we started supporting innovative businesses in 2015, how most companies dealt with this tax advantage here in UK really came as a surprise. They fell into three groups:
- companies unaware of this tax relief did nothing -their accountants were missing this because they were simply not having these conversations with their clients, as they were only concentrating on the basics and/or due to lack of expertise.
- semi-aware companies that found it too complex and time consuming and/or were not claiming their full entitlement.
- those that were aware but addressed it via specialised agencies - who often charge an exorbitant fee, including a fixed fee without guaranteeing any success.
We provide solutions for all of these scenarios and as part of our mission we focus on creating awareness of this topic among companies in the UK.
In a nutshell, the sort of innovation that HMRC is looking for - and as they plainly put it - is a scientific or technological advance, meaning that you attained knowledge that was not readily deducible by a competent professional.
To better illustrate what we do and what all this is about, we tend to share the story of a SaaS company that became one of our valuable clients a couple of years ago. They are a SME based in the UK that focuses on cloud hosting environments for e-commerce. What they did was not about rocket science nor developing something completely new and from scratch, although they were clearly bringing a technological advance into their industry. They simply took an already established e-commerce platform in the market and enhanced an existing process for e-commerce retailers by taking advantage of cloud technology which reduced costs and complexity for those retailers. This in turn greatly improved the user experience.
Understanding this from our client - not only allowed us to optimise their claim and make it robust for submission - but also allowed us to better cover the key questions that we usually cover when preparing your claim and supporting documentation for HMRC.
- On the technological advance itself, it was clear from the first time we heard about this SaaS company and their business model. They write software code and continue to develop it to fully manage multiple e-commerce infrastructures. The code can automatically create from scratch a new, enterprise grade e-commerce infrastructure in less than an hour. The automated process provides assurance of repeatable quality. Their approach, allows to constantly evolve and improve the existing clients' infrastructure as well as the "production line" that is used for automatically creating future infrastructures.
- On the technological uncertainties involved in the project, knowledge of whether what they wanted to create was feasible but how they would achieve it in practice was not readily available. The already existing e-commerce platform they had chosen was not designed to run on the Cloud. There were only a few isolated cases, with mixed results, of running this platform on the Cloud. Each case was an expensive exercise and very time consuming to implement. However, these uncertainties were then resolved by our client as they made it possible with their innovative approach for this e-commerce platform to run reliably on the cloud and productise the whole operation, through automation, at a fraction of the cost and time previously achieved.
- On how and when were the uncertainties actually overcome, here we tend to describe from a non-expert point of view the methods adopted to overcome the uncertainties and the investigations and analysis undertaken, showing that the matter was not straightforward. We do so even if the uncertainties weren’t overcome and we explain what happened. In our client’s case it was all about focus and becoming a specialist. The uncertainties were overcome by winning a real client before having a product, and building a Minimum Viable Product for their site, using their approach from the outset to make the process automated and repeatable for other clients.
- On why the knowledge being sought is not readily deducible by a competent professional, it might be publicly known that others have attempted to resolve the uncertainties and failed, or perhaps that others have resolved the uncertainties but that precisely how it was done isn’t in the public domain. In either case a valid technological uncertainty can still exist.
Here is also important to explain why they consider the uncertainties to be scientific or technological uncertainties rather than routine uncertainties.
In our client’s case, others experimented but the problem was too complex. For this SaaS company we were serving, it was all about focus and leveraging the principle of lean thinking and continuous improvement and innovation.
There were hosting companies and agencies but no one with the depth of knowledge and the level of automation and processes that our client offers to its clients and primarily this achievement was possible due to the fact that our client has the combination of people with a variety of relevant expertise, skills and experience.
A month after submitting their claim and support documentation to HMRC, this SaaS company was able to get 1/3 of their investment back as tax credit, which they have wisely used to fund their growth and continue innovating.
It should be noted that, beyond receiving similar benefits, there are several advantages of working with companies like us. We have developed a streamlined methodology - optimising the preparation of your claim whilst minimising the time you need to spend on it. This, incorporated into our overall approach, has proven successful time and again.
Needless to mention that HMRC guidelines tend to change - they changed in 2012, in 2013 and then again in 2015. This is another key reason specialised companies like ours - who are on top of these changes - provide value. Perhaps, most importantly is that we charge a fair fee for the specialised work that we do with no fixed upfront fee … meaning if you are successful processing your tax credit, we are successful!
We work with a huge range of different clients to help them identify their R&D and qualifying costs as our experience entails diverse industries. If your company is interested in a free consultation, a member of our team will be happy to discuss your R&D situation with you and whether your company qualifies for R&D tax credits.