An SME client came to me a few months ago struggling with an R&D claim enquiry. Their intentions were 100% genuine in terms of wanting to claim what they were entitled to, undertaking fantastic research that I am proud to know is happening in the UK and openly engaging with HMRC to deal with the questions asked.
Over many months they had responded to extensive questions, provided a mountain of information and could not understand why HMRC was seemingly not listening or understanding the information provided. Sadly, HMRC didn’t seem to explain things or help the company’s understanding as they used to, to everyone’s benefit.
Bright R&D stepped in at this point, agreeing an alternative way forward with HMRC, correcting the claims and dealing with a few technical points to reach an agreed position. We collaborated with HMRC and the client to ensure we provided exactly what was needed, but nothing more for efficiency purposes. The reality was, despite some flaws in the way the claim had originally been prepared, the final claim in terms of cash value was not very different.
HMRC rightly raised the potential for penalties to be charged and provided the various penalty disclosure documents in accordance with their guidelines (penalties can be charged at up to 100% of the tax at stake, reduced for taxpayer behaviour and whether the disclosure was prompted).
What I was not expecting however was a letter with 29 behaviours questions asking about why the errors had arisen. Particularly as HMRC already had a pretty good grasp that the errors arose due to a cash strapped SME trying to do its own claim alongside its accountant, to save costs.
I can’t help but wonder if anyone would see this as a good use of HMRC resources, not to mention the time taken up on the company’s part in responding.
In the ‘good old’ days, we would work collaboratively with HMRC to resolve issues and have a sensible conversation regarding penalties. We believe that penalties absolutely should be charged where a taxpayer is negligent or seeking to claim monies not due. They should not be used in the case of genuine mistakes that have been made good at the earliest opportunity and will not be repeated.
@HMRC – is it time to reinject some good old fashioned common sense alongside the formulaic processes and standard letters? Let’s all work together to achieve good outcomes as efficiently and pragmatically as possible.
@R&D claimants – you have been warned – do ensure that your claims are ‘right first time’ and if in doubt, consult.
