James Dudbridge on the innovation advisory offering of FB Consulting

ForrestBrown started as an R&D tax credit consultancy, which has evolved to include a broad range of service lines to support business innovation. Its advisory practice – FB Consulting – is led by Director James Dudbridge, who explains what sets the firm apart and the key challenges it is helping clients with.

Can you provide some insight into ForrestBrown – the services you offer and the size and profile of your typical client?

ForrestBrown is an innovation incentives consultancy, supporting businesses across a broad range of sectors and sizes, from R&D-intensive SMEs to large multinational groups.

We have capability across five key service lines: R&D tax relief, Patent Box, grants, capital allowances and the advisory practice that I lead – FB Consulting. The key for us is in identifying where and how we can add the most value. An incentive available to two companies may be the same, but the way in which two companies engage with it can, and should, vary widely.

Examples of our work might include agritech startups seeking to fund R&D into pioneering vertical farming methods; or global manufacturing businesses building new facilities in the UK and looking for advice on the incentives available. We cover the whole range.

What sets FB Consulting – it’s tax advisory practice – apart from other industry providers?

Our work in FB Consulting can be broken down into two broad areas. The first is primarily project based. These can be discrete projects, providing ad hoc advice on eligibility issues and specific changes to R&D tax relief (our current focus is on the new contracting out rules), or undertaking due diligence work for investors and other intermediaries involved in transactions.

We are increasingly involved in larger projects, supporting businesses to lean on their in-house capability and build the structures to identify and access innovation incentives, while minimising risk and reducing their reliance on external support.

The common thread is that we treat each project as distinct and we are always flexible in our approach. Wherever possible, we encourage proactive engagement with innovation incentives, which can add real value to forward-looking commercial decision making.

The second is the support FB Consulting provides to companies – the majority advised elsewhere at claim stage – with their R&D tax disputes. We’ll work with clients to understand the strengths and weaknesses of a case, enabling them to make an informed decision on how to proceed.

We’re fortunate to be able to draw on a multi-skilled talent pool to support this. Our team comprises not just qualified tax advisers, but accountants, lawyers, industry specialists and a former HMRC inspector – making breadth of experience and expertise a significant differentiator.

That blend of industry and technical capability facilitates a rigorous approach to enquiries and helps to drive efficiencies within the process – including on large and complex enquiries – where we’ve had some significant success in recent years.

What are the most common misconceptions businesses have about R&D tax relief, and how do you help them benefit from this incentive?

There can be a “business as usual” approach to R&D tax relief, which can create complications both in embedding flawed approaches to aspects of the claim process, while also meaning that companies can be slow to identify change and the impact on them. It also means that one of the main benefits of innovation incentives – both on a policy and practical level – is frequently missed: the forward-looking engagement which drives decision making and engagement with innovation in a business.

For example, we are working with a company to help them understand the implications of the new contracting out rules. The issue is particularly relevant for them given the prevalence of both direct and indirect government contracts in their sector. While the academic answer is important to complete their claim properly, what has proved the focus of our advice is equipping the wider commercial teams with the tools to determine the likely impact on a contract-by-contract basis. This is because our advice will feed directly into the commercial terms that are agreed in each case. Without this, the company would effectively be blind to the net commercial return of their projects, as well as being open to more disputes and enquiry risk.

So, a forward-looking rather than a retrospective approach is important.

You’ve had notable success in HMRC disputes, including a landmark victory at First-tier Tribunal. Could you share some insights into handling these complex tax disputes?

As a practice, we are always looking for a balance between a robust defence of our clients’ positions, with an engaged and collaborative approach with HMRC.

In terms of our approach to individual cases, we always start with a thorough understanding of our client’s case and from that, we build a strategy that aligns with their priorities. This will be adapted as we go through the process.

All strong cases are built on a solid legal foundation. Background information, frustrations with the enquiry process, issues with HMRC’s responses and views: none of this is relevant to the question of whether a client has a strong legal case. It can inevitably speak to strategy and issues such as costs, but it is essential to be focussed on the arguments that will win you the case. That is not always straightforward when a client has experienced a lengthy enquiry, but part of our role is to provide that focus.

R&D is a complicated environment. Many of the disputes focus on interpretations of Guidelines which incorporate requirements for subjective judgments; while others are on points of eligibility that primarily rely on a more objective exercise of statutory interpretation. It was the latter type of dispute where we won our significant victory in Quinn (London) Ltd v HMRC in 2021, dealing with an industry-wide point of dispute with HMRC over the interpretation of a legislative restriction to R&D tax relief.

What do you see as the biggest challenges for R&D-intensive businesses under the new government, and how can the UK maintain its appeal as a hub for these companies?

An unprecedented period of legislative change, culminating in the merged scheme last April, has been challenging for many involved in R&D tax relief. Those changes are still new to a lot of companies (and will be for some time), so a period of stability is welcome.

That said, a key focus for the new government is delivering economic growth and, with the right framework in place, business innovation can play a major role in achieving this.

The key for me is that the new government avoids looking at this challenge simplistically, with tax policy used to score political points. The rate of R&D tax relief gets a lot of attention but, for it to be effective, the legal framework needs to be efficient and clearly workable and, in turn, effectively administered. Those innovation incentives then need to sit in a wider, coherent, framework of measures that seek to resolve some of the other issues which innovative businesses face, especially around access to skills and finance.

Despite everything, the UK remains an attractive place to do business. Provided the government listens to business and focuses on policy that seeks to achieve rather than prove something, then I think we will be well placed going forward.