Anyone who is even remotely connected to R&D tax relief, or indeed tax and accounting more generally, will have now seen the excellent piece shining a light on poor agent practice. Sadly, this case does not come as a surprise to anyone who has been calling out sharp practice in this sector (me included). Now that the subject is gaining some traction, is this the time to clean up this mess once and for all?
R&D tax relief incentives UK businesses to innovate
Let’s never lose sight of the job that R&D tax relief is there to do. The policy behind it is good and contributes to the UK’s success in the global race towards innovation. So focussing purely on professional standards let’s remember that there are advisors who are dedicated to their clients, know their subject matter and are running successful businesses whilst preserving the integrity of the R&D tax relief schemes. I’m proud to count Source Advisors as a leader amongst those highly reputable firms. The enemy here is not entrepreneurship but rather it is the greed of a few. Any business worth its salt invests in process, procedures, training in a valiant attempt to create something of value to their clients and indeed themselves.
Not all R&D tax relief agents are created equal
But we know that there are far too many opportunists hiding behind a limited company, we have seen similar dynamics with pensions, PPI, investment vehicles R&D tax relief is yet another service the fraudsters have got their hands on.
This isn’t new information. I wrote about this in 2022, How to select the right R&D advisor for your business. I even wrote about this is 2021, Day of reckoning for unscrupulous R&D tax relief providers…, I think I started writing about this in 2020, When is a disruptor really a distraction?
Should businesses who made a claim with these types of agents have been more sceptical? Maybe. We have certainly lost business over the years to competitors who have gone out promising quicker, faster, better, higher returns and too often people buy the headline. I am constantly surprised by prospective clients who think they are intitled to R&D tax relief, who think it should be a matter of minutes to compile a claim and who expect to pay pennies for the service. It’s not comfortable to tell them that we can’t identify eligible R&D projects for the current year, never mind in the previous claims they have made. Or that it takes time to produce a quality technical report, and that expertise comes at a price. But when we aren’t believed then the cycle continues.
There should be consequences for those that abuse the system
The easiest way to stop the abuse is to stop the systemic poor practice. The recent coverage left me wondering that are we now at the stage where this is now a criminal matter and if the relevant authority should step in? Let’s not forget these rogue advisors will have made significant sums here, if they knowingly made fraudulent claims should they be seen as the proceeds of crime? One firm may have been called out, but there are MANY still operating some of which at significant scale.
We need more than some press coverage we need real action.
Why this matters to accountants
The danger is that accountants will start to mistrust R&D tax relief as an incentive and discourage any client from claiming, even in cases where this is crucial benefit that they are entitled to as an incentive for innovating.
Or they may be discouraged from seeking the support of specialist advisors, or discourage clients from seeking third party support. This cuts accountants off from the very expertise they need at a time when the R&D tax relief scheme is under the most scrutiny. Specialist knowledge from professionals has never been so critical.
The truth is I think you already know who the good guys and the bad guys are in this marketplace. I think HMRC know this too. By all means bring in some due diligence to your choice of R&D advisors and agents, we expect that and welcome it. But don’t refuse the specialist advice you need or deny your clients the tax relief they are entitled to.
Let’s take this opportunity to make a real difference now
To anyone who is interested in a healthy, growing UK economy, R&D tax relief is not the enemy, sales and marketing is not the enemy, HMRC is not the enemy – so don’t villainise the wrong things. Let’s reset the conversation as broadly as we can by asking the appropriate authorities to step in instead of relying on hot air and bluster.
The quicker we stop the rot, then the quicker taxpayer’s money will be respected and the importance of successful deployment of funds through this mechanism will be realised.
