Article / 27 Oct 2021

UK Government plans to improve compliance of R&D tax relief

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Gateley Capitus

There continues to be high levels of concern amongst professional bodies and commentators that claims for R&D tax relief are being submitted to HMRC without the right level of care and detail. 

As the number of claims and firms offering an R&D tax service grows, is the sector right to be concerned over the quality of claims?

Firms range from large audit and tax practices to local accountancy firms, and specialist R&D tax credit firms, which can also range from small operations to very large specialist firms. R&D tax advice is a very specialist area of work and it is important to choose your adviser carefully. 

Key things to consider when choosing an R&D adviser

  • Check that the firm has the expertise to provide this service. What tax or technical qualifications and experience do they have? 
  • What is the claim process? It is unlikely an adviser would obtain sufficient information just from an exchange of written information. 
  • Are they using statements like ‘HMRC approved’ or we use an ‘HMRC approved methodology’ and have a ‘100% success rate’. HMRC never approves R&D advisers or methodologies, so such marketing claims are spurious. A key element of our tax system is the concept of ‘process now, check later’ which means that claims are processed by a computer long before being reviewed by an HMRC Officer, and many are never looked at. In practice, most advisers will have 100% of their claims agreed. But marketing statements along those lines often indicates that the firm has prepared a modest number of claims and been lucky that none have yet been checked, and it gives you no comfort about potential claim reductions that may be required if claims are challenged.
  • Firms with relevant experience of the scheme and your sector will explain where a claim cannot be made, giving you peace of mind and reducing potential problems with HMRC.
  • Will the firm disclose and go through their technical and financial reports with you before submitting to HMRC, to ensure you understand approve what is being claimed? Remember the accuracy of any tax filings remains the responsibility of the company so it is important you agree the claim and understand sufficient information to do so.
  • Are they meeting other regulatory requirements? R&D advisers must be registered for anti-money laundering (AML) supervision and if you are not asked for relevant client due diligence at the outset this might suggest the firm does not meet all of its other regulatory requirements.
  • What support will they provide if HMRC enquire into the R&D tax credit claim? Will there be any additional charges for this?
  • Check whether the fees are a fixed amount or based on a percentage of the tax reclaimed and that you are happy with the basis. When does the fee become payable?
  • What are the arrangements on fees if the claim is later turned down or reduced by HMRC? 

R&D Tax Credits may be something you have claimed for many years without any questions from HMRC, but HMRC’s focus could change at any time. So, we still recommend that you assess your claim process to ensure you claims are receiving the attention, experience and detail required. 

Would you like more information regarding the Government's plans to improve compliance of R&D tax relief? 

If you would like more information regarding R&D tax relief please contact our expert listed below and visit our Tax-efficient R&D service page for more information.