Ever increasing scrutiny of Research & Development tax relief claims is unsurprising given the government’s clear indications of tightening compliance over the regime in recent months. Recently, HMRC notified agents and representative bodies that it has halted some Research & Development Tax Credit (RDTC) payments while it investigates some ‘irregular’ claims.
Whilst we wholeheartedly welcome the government’s crackdown on any potential abuse of the scheme, regretfully, this means delays to normal processing times, invariably impacting legitimate claims, as well.
Recent press coverage has highlighted a long-standing issue regarding the R&D tax credit industry. There are indeed a minority of advisers who will push the boundaries of qualifying expenditure. From April 2023, the name of your R&D adviser will need to be disclosed to HMRC. We therefore strongly advise businesses to choose a reputable R&D adviser in order to avoid a lengthy enquiry and a significant penalty exposure.
Leyton takes pride in our compliance and regularly works with HMRC in consultations to ensure that the R&D space remains safe and trustworthy.
Leyton is a large player in the heavily fragmented R&D tax reliefs market – we estimate that we hold approximately 5% of the market share of R&D tax relief claims in the UK at present – and we were grateful for the government’s invitation to provide views in response to the “R&D Tax Reliefs Report” published in November 2021 (the Report) and engage further in relation to the areas covered by the Report in the ongoing review of the scheme. Targeting abuse and improving compliance are the most crucial areas of the considered reforms.
We are committed to quality and compliance and welcome further measures to prevent misuse (whether deliberate or inadvertent) of the scheme. We share the government’s concern, not least because it taints the work Leyton is doing in the R&D space, and we agree that robust action needs to be taken to address it. Recent years have seen the emergence of R&D advisers, who are typically not members of professional bodies – many with no background in tax – take advantage of customers who are unfamiliar with claiming for R&D, often submitting dubious claims.
In our consultation response to the government, we suggested the introduction of the following measures to further assist with better transparency, openness and collaboration:
- a dedicated Customer Compliance Manager for agents/advisers to allow for increased communication between HMRC and agents/advisers;
- an online portal allowing claimants, agents and third party advisors to view advance assurance documents and the progress of any submitted claims; and
- a forum to discuss and debate technical tax issues on a no names/without prejudice basis (we do not think the Research and Development Consultative Committee meetings provide sufficient access to enable open discussion at present).
We consider that this would also help to reduce errors made as a result of a good faith misinterpretation of the rules.
As ever, choosing an experienced, reputable and qualified specialist advice for R&D Tax Relief remains paramount, and whilst no single provider can influence processing times, the support and guidance received in the preparation of the an exhaustive and robust claim and/or navigating an HMRC enquiry can make all the difference.
Present processing time delays aside, with the R&D Tax Relief directly linked to corporation tax filing dates, up to 15 months can elapse between companies incurring qualifying expenditure and receiving their benefit. This puts financial pressures on the businesses’ capital and can make growth tricky and is bound to be further exacerbated by the current delays.
Leyton can now offer our clients a strategic option to alleviate the resulting cash flow pressures by allowing eligible companies access to funds against expected R&D Tax Credits earlier, thus bridging the gap between R&D spend and receipt of the benefit, and continually fuelling the R&D effort.
Get in touch today to find out how we can support you with access to capital on either an ad hoc or quarterly basis.
