Even so, most will have an opinion on it. These range from ‘It’s a tax dodge and I don’t want to get anywhere near that’ to ‘Please get me back everything you possibly can!’. Both extremes tell you immediately that you’ll need to educate them about the scheme before you can continue.

Making things worse, there’s a lot of conflicting and misleading information online about what qualifies for relief. A lot of R&D specialists are still using lines like ‘almost anything you do can be R&D’ and ‘HMRC will never check your claim anyway.’

It’s no wonder that SMEs then misunderstand the scheme, the risks and liabilities, and how it all applies to them.

When you spend a little time talking to your client about the R&D scheme it obviously gives them a better idea of who and what it’s for. But it also positions you as a trusted source of information; one they’ll turn to when they’re ready to make their claim. And if they’re not eligible, at least they’ll be much more clued-up if they ever get called by a claim cowboy.

In this article, we explain the points you need to cover the first time you talk about R&D with a client. In the conversation, you’ll be able to help them decide whether R&D tax relief is right for them – and you’ll discover whether you need to invest any more time with them.

Step 1 – Check the basics don’t rule them out

There are certain basic facts that immediately mean a company can’t claim for R&D tax relief. It’s not worth discussing R&D at all if:

  • The organisation is an LLP
  • The company is in administration or liquidation
  • Their last set of accounts state that the company isn’t a going concern
  • They don’t have any expenditure

If any of these apply to your client or prospect, you can stop right away. If you’re looking at R&D for a client, let them know. They’ll appreciate that you’ve thought about them and have ruled them out for a good reason. If you’re an R&D consultant looking for new leads, you can skip ahead to your next one.

Step 2 – Ask them what they already know about the R&D scheme

If the answer’s ‘Not much’, then this gives you the opportunity to set them off on the right path. While few clients will care about the specifics of how R&D tax relief is given, most will be interested to know that:

  • HMRC uses its own, very specific, definition of R&D, which often varies considerably from what most companies think of as R&D
  • You don’t get R&D tax relief for using new technology but developing it
  • Unlike a grant, you apply retrospectively.

Given the amount of misinformation in the market, it’s also a great idea to let them know that:

  • If a consultant’s sales pitch sound too good to be true…it probably is. Ask the client to run any dubious-sounding promises past you so that you can give a second opinion.
  • Despite the impression that many R&D consultants give, the claim is always their own responsibility. This means that the company must make efforts to engage good advisors and conduct its own checks on their work.
  • If there are errors in the claim, HMRC can and do charge penalties, so tell them not to believe the line ‘HMRC will never look at your claim’ – it’s simply not true.

The objective isn’t to scare your client, but to make sure they realise that they’re dealing with a tax matter, with all the seriousness that implies. Also, it’s important they realise that the claim is theirs and that they can’t abdicate its responsibility to any third party.

Related: 5 mistakes accountants make when discussing R&D eligibility with clients

Step 3 – Clearly set out the next steps in the claim process

Having given your client a clear picture of their responsibilities, you’ll probably get some questions on what types of activity would qualify. Rather than try to shoe-horn that into the end of this initial meeting, it’s a good idea to set aside some time to discuss that with your client in more detail – and with the most senior technical staff present.

Get a date in the diary, ask them to get the necessary technical staff to attend, and provide them with a link to HMRC’s guidance so they can read up on the detail before your next meeting. You may also wish to sketch out your process and fee for helping them, so they’re clear on how you work and charge for your R&D services.

Related: 3 steps to effective R&D eligibility screening conversations

How to check your client’s followed best practice if they’ve already prepared an R&D claim

If you’re an accountant, you’ll sometimes be asked to submit R&D claims that your client has prepared in conjunction with an R&D specialist. In these cases, it’s often a good idea to ask whether:

  • They have read HMRC’s definition of R&D
  • They have a senior technical person who would be willing to speak to HMRC in more detail about the work they’re claiming for
  • They understand that the claim is their responsibility, and that they should have been involved in the detail of its preparation
  • They have had visibility of the claim documentation and signed it off as accurate

If your client can’t give you these assurances, you may wish to use a disclaimer that states that you weren’t involved in the claim’s preparation. Another option is to have it reviewed by an independent party, ahead of its submission, to identify any red flags that could trigger an enquiry from HMRC.

Further resources

If you haven’t already, you can do a simple Portfolio Review to highlight which clients to have this conversation with first.

In our training academy we have a whole course on Establishing Eligibility – How to discuss R&D with clients. If you’re anxious about this, or about the subsequent conversations you’ll need to have with clients, the course lays out a detailed process to guide you through.