Payable Tax Credits are one of the benefits of an R&D claim which surrenders losses to create a payable amount to the company from HMRC. Many R&D consultants base their fee on a percentage of their client’s benefit, but this can be very misleading as the following example shows.
As a simple example….
This might all seem reasonable HOWEVER, in 2021, the company had taxable profits of £200,000 on which £38,000 of Corporation Tax was payable. Prior to the previous year’s R&D claim, they were carrying forward £100,000 of losses which could have been used to halve the amount of Corporation Tax due in 2021.
So, whilst the R&D claim did generate a benefit of £33,350, it lost the company a future benefit of £19,000, which the specialist consultancy firm did not take into account when calculating their fee.
We don’t believe this is a fair practice and so only ever base our fees on the additional loss created by the R&D claim. In the above example, we would have invoiced the company for £3,770 (£130,000 @ 14.5% @ 20%).
Both ways of charging are at 20% but produce very different fees!
If you have any questions on this blog or anything R&D related, please contact us at [email protected].
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