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>time-tracking by the hour is incredibly important As someone who does the R&D tax credit for a lot of tech companies, let me tell you that it really, really i

• cpfohl 9y ago
  Thanks for that insight. I didn't realize that existed.
• berdario 9y ago
  I'm wondering how widespread claiming "R&D tax credits" actually is. To think that most companies could/would seems preposterous (how many are truly doing something worth of the monicker R&D?) I'm seeing an ecommerce business applying for R&D credit, and that seems absurd, since > Your company can only claim for R&D tax relief if an R&D project seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty - and not simply an advance in its own state of knowledge or capability. From the gov.uk article: https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief https://www.gov.uk/guidance/corporation-tax-research-and-dev...
  • stult 9y ago
    Well I'm in the US, so I can't speak to the UK's regs with much expertise, except insofar as I know most of the world's R&D credits are based on ours. But in the US, most web dev qualifies, including fairly run of the mill ecommerce site. Just judging from what you quote here thought, the US rule is less rigorous. Taxpayers must resolve technological uncertainty just as in the UK, but it's a taxpayer centric test. Meaning, that uncertainty can be "simply an advance in its own state of knowledge or capability." Honestly, I shouldn't say this because it's very much against my own interests, but the US regs are way too loose and permit credits for work that just does not seem to me to be worth subsidizing. But for a normal development company, it's worth tracking hours to gain that subsidy because the IRS primarily challenges us on the validity of the underlying data at this point rather than the qualification of the activities themselves, because a large amount of litigation has settled most of the questions in that area in favor of taxpayers.
    • berdario 9y ago
      Interesting. I guess that, even if the rules appear to be stricter, in the UK it might de-facto be the same, if HMRC is not contesting many claims.
    • deleted 9y ago
      [deleted]
  • wmil 9y ago
    In Canada it's basically ubiquitous at small to medium companies. SR&ED and IRAP are the big programs. The standards are pretty loose.
• ljw1001 9y ago
  I think that you're not necessarily considering the side effects of (A) working 10 hour days, and (B) spending an hour on paperwork. People will often start to wonder why they work so hard if the company doesn't take their time seriously. This can negatively impact morale, and that has a real, if hidden, cost.
  • stult 9y ago
    I picked those numbers to make the math easy. No one should or will spend anywhere near an hour entering time into a time tracking system, unless it is horribly designed. >People will often start to wonder why they work so hard if the company doesn't take their time seriously. This is a failure of communication. People tend to get frustrated with paperwork when they do not understand its purpose or importance. Those employees who are discouraged by hours tracking paperwork don't realize that the company is being paid by the government to have them fill out that paperwork. Management needs to communicate to employees that there is a very significant impact on the bottom line from them properly filling out that paperwork. That impact increases their wages and the company's ability to survive and thus to provide them continuing, stable employment. Now, if you think its pointless that the IRS requires them to fill out this paperwork, well that's another discussion, but I can offer you arguments in favor of verifying R&D activities before granting public subsidies for them and in favor of the subsidies themselves.
• raverbashing 9y ago
  What kind of tracking do you need and what's the needed resolution? Can we just have "customer work" or "R&D work" for 8h a day?
  • stult 9y ago
    The quality of your data dictates the probability of getting an accurate, audit defensible credit calculated. More detail makes it easier to defend. We can work with "R&D work" level of detail, but it is less defensible and it will cost more to have us (an accounting or consulting firm) calculate the credit for you. It also makes it much harder to calculate in-house or using paid self-help software tools. Particularly because IRS rules require that the wage costs be allocable to a "business component." Business component is a technical term of art specific to the R&D credit, but roughly it corresponds to projects, and more specifically to a (1) new or improved (2) product, process, technique, formula, or invention. It must be one and only one of those, no mixing of new and improved or product and process. So if you have a new product and a corresponding new production process, they must be separated in the reporting of qualified research expenditures, even if you as a taxpayer have classified the two BCs as a single project. So when you have time tracking, it is best when it allows us to tie specific hours worked to specific projects and tasks. We can then work out from the project list how to combine or split up your projects into business components and map the costs that way. From your activity codes, we can set a very specific and defensible qualified percentage to each employee's time, without having to disrupt your business by surveying your employees (plus the IRS does not respect self-reported, non-contemporaneous survey data much if at all). As an example, I walked into a software dev client's offices a few weeks ago to sit down with the CFO, comptroller, and their head of development. I walked out with highly detailed project tracking data and spent four hours processing it using our internal software tools, calculating a $2m benefit with a high degree of accuracy. At other firms with lower quality data, it can take hundreds of man hours to achieve the same benefit. So we gave the software client a massive break on our fee (and actually still profited more than we would have with a less prepared client) and everyone walked away happy.
    • raverbashing 9y ago
      Ah I see. But task tracking != project tracking And this does not necessarily require everything to be done by the developer Even if the value that can be obtained by this is higher, it seems to me it's cheaper (in general) to have someone track the effort in this specific way than make developers do it. (Also if your developers are unhappy or busy no tax credit can save you)
• itamarst 9y ago
  An aside, but working 10-hour days is bad. Anything more than 40 hours/week and you're actually reducing overall output.
  • ambicapter 9y ago
    What if you're working four days a week?
    • itamarst 9y ago
      Couldn't do it personally (I doubt I could be productive for that long in a row), but presumably it works for someone. The research on work hours I've seen is mostly about week-work length, but I imagine there's some research on workday-length as well.
• developer2 9y ago
  I see in one of your sub-replies further down that you are in the US, but even hearing you mention "R&D tax credit" makes my blood boil. At least in Canada, the "Scientific Research and Experimental Development Tax Incentive Program" (aka SR&ED) is a complete scam. Every development shop in Canada claims credits to recoup a significant portion of employees' salaries. Yet not a single one of my companies has ever performed R&D. The analyst comes in and spends a week getting every employee to lie about their work, enticing them to rephrase how their mundane copy-paste-from-Stackoverflow work somehow qualifies as "R&D". The majority of taxpayers' dollars paid to corporations through the SR&ED tax program is fraudulent.
  • stult 9y ago
    Yeah, I felt that way too when I started this work. What I've come to realize is that the tax credit is not about conducting science in the strict, academic sense of the word, a la Karl Popper and the received view. The systematic evaluation of hypotheses just doesn't happen that often outside the academy. Instead, the tax credit is really a political compromise crafted to appeal to both sides of the political spectrum. It's about subsidizing high paying, professional, white collar, technical jobs so that employers don't outsource them. That makes the credit an anti-free market subsidy designed to protect jobs but disguised as a pro-science, pro-innovation policy whose main beneficiaries are large corporations. And honestly, even in the most "sciencey" firms, most of the R&D going on is dreadfully repetitive and unimpressive. Just as you cut and paste SO code, pharma researchers are just "cutting and pasting" the nth iteration of a chemical formula. They're not unlocking the secrets of the universe, they're just trying random shit until it works. Which, interestingly, is part of how the tax regs define a process of experimentation. Instead of "trying random shit until it works," the regs call that strategy "a systematic trial and error methodology." Your issue is that you have a mental definition of R&D but the tax codes of the US and Canada do not define R&D in the same way, which to you seems dishonest. But you need to remember that, from a tax perspective, the definition isn't important except insofar as it helps or hinders the underlying policy objectives. Your definition may be closer to a colloquial or idealized definition of R&D, but it's not necessarily the definition which best achieves the policy objectives of the governments in question.