UHY Ross Brooke Chartered Accountants

R&D tax credit claims – where are we now?

R&D tax relief

R&D tax credit reliefs are intended to be aimed at those businesses in innovative industries extending knowledge or capability in a particular field of science or technology or creating an advanced process, material, device, product or service.

However, over the years we have witnessed more and more unregulated firms entering the market promising businesses “quick and easy” tax reclaims amounting to many £000’s.

HMRC have become increasingly aware of fraudulent and /or unjustifiable claims and the fact that the Treasury was giving away huge sums of money for spurious claims. Reported examples include claims such as conversion of offices into bike sheds, “creating” new restaurant menus, and even mixing horse food ingredients in a bucket to create new horse food.

Rather than targeting the unscrupulous operators and claimants, HMRC have adopted a “volume compliance approach”.

Phil Kinzett-Evans - Tax Director

As our Tax Director Phil Kinzett-Evans explains “The practical effect of the volume compliance approach seems to be that HMRC are no longer reviewing each case on its merit, but simply issuing standard letters without even reading the accompanying claim documentation. Furthermore, the aggressive approach adopted by some HMRC officers and refusal to engage in person or by telephone gives the taxpayer and their agents little or no opportunity to explain the R&D activity.”

Our R&D Senior Tax Manager Mathew Browne echoes Phil’s frustration and further adds that “HMRC are seemingly rejecting valid claims without considering the facts and even going so far as to levy penalties on the taxpayer where they consider that no R&D has taken place”.

The professional accountancy and taxation bodies including the CIOT have all expressed concern and we note that the CIOT have only this week written to HMRC. A copy of the letter can be found here. 

Chris Davies a director in the Newbury office summarised the current position “Whilst it is right that HMRC should ensure that claims are genuine, to simply issue standard letters and reject claims without due consideration is simply not acceptable. We trust that HMRC will address the concerns raised in the CIOT letter and in the meantime, we will continue to support our clients and submit robust and defendable R&D tax credit claims on their behalf”.

The introduction of the compulsory additional information form, (AIF) to be submitted with all R&D claims from 1 August 2023 is a welcomed addition which should help reduce the volume of fraudulent claims. Hopefully then HMRC can focus their attention on the remaining over-aggressive claimants. 

Next steps

Please contact us if you would like to discuss whether any of the projects carried out by your company potentially qualify for R&D tax relief. Also, let us know if you are contacted by an organisation claiming to be R&D consultants and we can check whether they are legitimate.

UHY Ross Brooke employ experienced R&D tax claim specialists to ensure that only robust claims are submitted and where necessary will advise clients to amend or indeed withdraw claims where appropriate.

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