A company approached me for some help with an ISBC R&D enquiry last December. Before launching into preparing a response, given how difficult ISBC is to deal with, we had a look into whether the enquiry was validly made.
The R&D claim had been filed on time within the tax computation. The accountant had decided to file an amended return a few months later to submit an R&D report. HMRC was out of time to enquire into the original submission, but still in time to enquire into the amended items only.
We wrote initially to point out that, as there had been no amendment to the R&D claim, the enquiry was not valid.
Ignoring our letter, HMRC responded with a Schedule 36 notice, forcing the client to respond within 30 days.
Standing our ground, we appealed the notice, referred them back to our original letter and also pointed out that the amended return was incomplete because the amended CT600 was not accompanied by a tax computation (as found in the recent Bureau Workspace Limited case).
This week, HMRC closed the enquiry on the basis that an enquiry into the amendment is restricted to the amended items only.
It is questionable whether this was on the basis that the R&D claim was not amended or whether this was because the amendment was not valid. Either way, this was a good outcome for the company as it has not had to battle through the pain and frustration of an ISBC enquiry.
Sadly, this is yet again another valid claimant that will be disinclined to make future claims, despite the positive outcome. It seems UK innovation will pay the price.
