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Firms cash in on questionable tax credits – our thoughts

You may have seen an article in The Times this weekend, titled ‘Free money from HMRC’: firms cash in on questionable tax credits. The article highlights that “The taxman has lost an estimated £469 million to fraud and error under a multibillion-pound scheme”. Last year the total amount claimed under the R&D tax relief schemes was £6.59bn.

We welcome the industry being held to the highest standards

I am certainly someone who believes passionately that UK businesses should be rewarded for innovation, and that the taxation system is an efficient and inclusive lever for delivering those benefits. I read this article with profound discomfort but not with any surprise. This is exactly what I have been saying for years now. I look through my blogs posted here – and we have continually highlighted the need to get the rogue “advisors” out of our market and promote robust observance of the R&D tax relief schemes.

Custodians of the R&D tax relief schemes.

GovGrant has always seen itself as custodian of the schemes, believing that we have a role in upholding their integrity. We welcome the scrutiny and have never believed that this is “free money for nothing”. There is no place for this type of advisor, and they represent a threat to taxpayer money, UK businesses and the very schemes themselves.

I have seen first-hand the work of “aggressive” advisors who encourage business owners to make questionable claims. There are times when we’ve brought on board a new client and having reviewed their previous claims have had a robust conversation about the validity of their historic claims. It’s never easy, but it’s our responsibility to push back and avoid our new clients making unsubstantiated or dubious claims. We need them to understand the risks they are carrying forward.

An HMRC enquiry service for companies stranded by rogue advisors

We have also introduced an enquiry service now for those who have found themselves on the wrong side of the fence by following the advice of a dubious practitioner. In the extremely unlikely event that one of our claims is followed up or challenged by HMRC, we will, of course, stand by that claim and handle any HMRC conversations on behalf of our clients. Other advisors aren’t nearly so rigorous and having advised a fraudulent or erroneous claim they have backed off and left the client to defend that claim alone. We offer a service to review the claim and advise these companies where they stand and the best course of action. I wish this wasn’t necessary but that’s where we are.

How do you protect yourself from rogue practitioners?

So, what do you look for in an R&D tax relief advisor:

Time – How much time does your advisor spend on your claim? If it’s 30 minutes, then that isn’t enough time to make a robust and compliant claim.
Cost – If the advisor is charging peanuts, then it can only be because they aren’t spending time on the claim. And they certainly won’t offer to defend an enquiry on your behalf as part of that fee.
Risk management – What quality assurance processes are in place with your advisor to mitigate the risk of an HMRC enquiry?
Support – Do they have enough R&D tax relief expertise and experience to offer genuine support if you do face an enquiry?

And if your advisor talks about “free money” or insists that HMRC “almost never checks” then I strongly recommend a rethink.

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