Business Eye Feature Expert Partners for R&D Tax Credits
Interview With Momentum Group, Managing Director Tom Verner in Business Eye (p.g. 44-45)
When it comes to Research & Development Tax Credits, introduced by the Government to help encourage R&D amongst companies here, there are plenty of grey areas.
For a start, plenty of companies out there simply don't realise that the tax relief exists, or that they may be eligible to benefit from it. And, even when realisation dawns, companies and even their accountants can fail to negotiate the complex rules and procedures.
In a nutshell, R&D Tax Credits were introduced by the Government in 2000 to make UK companies more competitive in the global marketplace by incentivising and encouraging firms to invest in the development of innovative products and services.
They can be claimed by any company liable for corporation tax and, as far as increasing numbers of local firms are concerned, they're a valuable source of funding.
HMRC figures show that Northern Ireland companies claimed a total of £55 million in R&D Tax Credits last financial year. But we're way behind the curve. The £55 million total represents a mere 3% of total UK claims.
Here in Northern Ireland, one Bangor-based company is a clear market leader when it comes to advising local companies on R&D Tax Credits and guiding them through the bureaucratic maze.
The Momentum Group was established back in 2009 by local entrepreneur Tom Verner, who swapped a high-flying career in sales management in the entertainment sector to fill a gap for dedicated, professional advisory services around R&D tax relief.
“I started out back then as more of a business performance consultant, advising a range of clients on how to increase their bottom line,” he takes up the story. “While working with a client company, I came into contact with an English firm advising on R&D Tax Credits. They helped my client to successfully apply for substantial relief and it started me thinking that someone needed to do it here....and do it well.
“For the next couple of years, I went into apprenticeship mode, learning all I could about R&D Tax Credits. Then we started to develop and grow Momentum. Nowadays, we're a team of 14 specialists, we're still growing, and we've carved out a niche for ourselves working with a wide range of forward-thinking companies and accountants of all sizes here in Northern Ireland,” he says.
Momentum, he says, works on a 90:10 principle. “We do 90% of the work and we only expect our clients to look after the remaining 10%.”
For businesses here investing in innovative products, new software solutions or advanced production processes, R&D Tax Credits are a significant source of funding. But they're also the most under-claimed form of corporation tax.
“Even the name is a bit misleading,” says Tom Verner. “It implies that the payment is in the form of a credit against future taxable profits. But it's also available as a cash payment, which a large proportion of companies choose to take it in this form.”
If claiming R&D Tax Credits were easy, most companies would do it themselves. But the procedure is not that straightforward. “HMRC's guidelines for the R&D Tax Credits are complex and any misunderstanding can lead to claims being submitted for activities that are ineligible.
“And, on the other side of the coin, many companies overlook activities that actually do qualify for relief,” adds Tom Verner. “R&D Tax Credits are a bit like an iceberg. The perception of what qualifies is usually only a fraction of the reality that lies beneath the surface.
“Every claim has to be supported by a detailed technical report, spelling out to HMRC that the project meets the guidelines. This can be a time-consuming and challenging process. And this is where our team of experts comes in.
“We'll sit down with a potential client, we'll do the due diligence and, if the projects and associated expenditure meet the criteria for this purpose, we'll prepare the necessary technical and financial reports to be filed directly with HMRC. Our team includes R&D technical analysts, finance experts and business consultants, all immersed in the area of R&D and tax relief.”
R&D Tax Credits, says Tom Verner, extend from sectors like construction, engineering and waste management to food & drink, manufacturing, pharmaceuticals and everything in-between. “It's not all about people in white coats,” smiles Tom Verner. “R&D Tax Credits are open to more sectors that most people think.
“Our particular skill lies in being able to identify activities that might be considered routine or normal but do in fact qualify for this tax relief.
“And our results speak for themselves. We've examined hundreds of companies, identified eligible R&D activities for each and have achieved a 100% success rate ranging from tens of thousands to hundreds of thousands of pounds.” The average UK claim under the scheme is £61,000, but Norther Ireland claims are at an average of £46,000!
Momentum works closely with an increasing number of accountancy firms here in Northern Ireland, including some of the bigger players in that field. Accountants, according to Tom Verner, have an understanding of R&D Tax Credits, but understand that by engaging with a specialist R&D Tax Credit advisory firm will almost certainly deliver a much greater benefit to the client due to their in-depth knowledge of what qualifies and what does not and its resources of technical analysts.
“We find that a lot of local accountancy firms will provide initial advice to their clients and then call us in to do the hard work,” he says.
And he advises local companies to be wary of some other ‘specialist firms’ operating in the same field. “We've heard of businesses being contacted by advisers who promise that almost everything they do qualifies. That's a stark warning that all is not as it might seem.
“When it comes to choosing your R&D Tax Credit partner it pays to be cautious. Do your own due diligence before you sign on the dotted line. Ask for references and take time to look closely at what's included in the fees.
It's also worth remembering that you're dealing with HMRC, and due to the increase number of R&D Tax Credit claims in recent years, claims are facing greater scrutiny. This could result in large penalties if prepared incorrectly. “HMRC has identified and prevented £300 million in fraudulent R&D Tax Credit claims last year alone. So it's crucial to work with a partner who will get it right and support you all the way.”
Momentum is a member of HMRC's R&D Consultative Committee and applies the highest professional and ethical standards to its day-to-day work.
“It's not just what we do. It's how we do it,” says Tom Verner. “We act with rigour and integrity in everything that we do, and our team of R&D analysts, accountants and consultants will work tirelessly to put the money you are entitled to back into your business.”