Types of R&D Tax Consultants

In the world of R&D tax relief, there are broadly three types of companies that cover most of the market in Sydney, Melbourne and across Australia and that offer services that range from forget-about-it to just-a-once-over.

Specialists 

For the specialist, R&D is their bread and butter. They usually have a complete, hands-on service and try to take the whole process off your hands. The service of an R&D tax incentive consultant typically includes an interview with your tech lead, writing the technical part of the claim, and creating the financial calculations. Comprehensive audit support is usually part of the package as well, so if the ATO wants to question any part of the claim, the R&D tax advisor specialist is there to handle it.

Accountants

Accountants are all-rounders, and you are probably very familiar with their technical activities including their accounting services, tax consulting, tax returns and ATO audits. Most accountants can and usually do offer RD tax incentive advice as part of their offering, sometimes bundled with other services, sometimes for an additional fixed or % charge. The main difference between an accountant and a R&D tax advisor specialist is that the service an accountant can provide is usually limited (though not in all cases). Accountants will typically create the financial calculations for corporation tax  and review a technical write-up that your team has put together. In most cases, they will offer only limited audit support, and most of the email and phone communication with the inspectors will need to be handled by your team.

Simplified Service Specialists

Given that many businesses have acquired some form of experience with R&D tax incentive claims, a new generation of service providers has sprung up to help the companies that just need a second opinion and some technical support. Most of these R&D tax advisor providers provide platforms that the client needs to input information into, and then most computations are generated automatically.

What to look out for when choosing the best R&D tax consultant

Here are some key factors to consider when you are looking for an R&D tax incentive consultant to help you file your research and development tax incentive program. 

R&D spending

How much you’ve spent is an important question, as the more substantial the claim, the more carefully an ATO inspector may look at it. If your credit is still on the small side, you can probably get away with filing a simplified claim or letting a non-specialist accountant create the claim. As your spending increases and the technology gets complex, a Research & Development advisor becomes critical. If your R&D spending is up to $30,000 – $40,000, which could translate into a credit of up to $13,000 – $17,000, it’s very probable that the ATO will not bat an eye, and you’ll be fine with a simplified filing. Your accountant can do the filing, or you can decide to self-file. A platform solution could be an easy way to solve this problem, as well.

Your time

To file R and D tax credits, there are a few more laborious steps that take a bit of time from you and your team. The filing preparation also often happens in moments when your tech team’s energies are better spent coding or designing, rather than writing pages of legalese about the eligibility of the technology they’ve created.

The tradeoff is not hard to guess – if you want to create at least part of the R&D claim, and have no problem being more hands-on in the process, then a lower service option, like letting your accountant check the filing, may be a great idea. Nobody knows your product like you, so writing the tech part of the claim yourself is often a good idea.

The difference a specialist makes in writing the claim is not necessarily a better understanding of the technology, but a better understanding of how to present it to an inspector, while ticking all the boxes for eligibility.

Financing your claim

If you are looking to finance your upcoming claim through R&D Advance Funding, having a full-service provider is paramount. Most lenders will work with the consultant to understand the claim and get an accurate estimate of its future value. Often, without a specialist, it can be hard for a lender to extend a term sheet as there is a lot of additional uncertainty. Having audit support at your side in case the taxman needs more clarification is also crucial if you are expecting the claim to repay a loan. This helps speed things up, maximises your chances of claiming the full amount, and puts the financing company at ease.

Dealing with an audit

An audit is a process where an inspector will ask questions as to the eligibility of certain technology projects or certain expenditures included in your business’ claim. The probability of an audit is low if your spending is low, but as you start investing more in eligible technology, this probability increases. As you get in the high hundreds of thousands or millions in claim value, it becomes very likely that an inspector may want to take a second look at your claim. This makes sense, this is taxpayer money after all. Overall, the higher your spending amount, the higher the risk.

The cost

Last but certainly not least, an essential factor in assessing the best provider is how much of your claim value you are willing to part with.

A full-service R&D tax consultant can charge from 10-20% of the final claim value, depending on the size, complexity, and timeline of the claim submission. There is a bit of flexibility in the fees with the R&D tax advisor, depending on contract length.  In some cases, R&D tax incentive consultants will have fixed fee deals sometimes on the table as well.

An accountant may file the submission as part of a package, charge by the hour or charge a fixed price of a few thousand dollars to review and submit the technical narrative created by your team. Additional enquiry support may be on a per-hour basis.

Simplified service platforms can cost between 5%-10% or, alternatively, charge a fixed cost of a few thousand dollars.