It was really pleasing to read The First Tier Tribunal’s recent decision re Hadee Engineering Co published 10th October concerning an R&D claim that was rejected as it was found to fall well short of what is required. Fundamental issues included whether the costs claimed were incurred, whether R&D was really taking place and whether the R&D was contracted out or subsidised preventing an SME claim altogether.
Anecdotally, we understand that HMRC (and the Serious Fraud Office) are pursuing many more fraudulent claims and the advisors involved. I believe HMRC’s words at a recent R&D Consultative Committee were that one might be ‘surprised’ at how much is going on behind the scenes.
There has increasingly been a lot of criticism of ‘cowboy’ R&D boutiques that lack morals and act unscrupulously and incompetently. For R&D advisors affiliated to accountancy bodies and the Chartered Institute of Taxation, witnessing such bad practices has been frustrating. And putting things right for previously ill-advised claimants can be a painful and time consuming process.
HMRC’s endeavours to ‘police’ bad behaviours will take time and are understandably not publicly visible. But may we say that we are appreciative that steps are being taken.
The Government’s consultation on raising standards in the tax advice market may also lead to longer term improvements. Suggestions have included limiting the provision of tax advice to qualified professionals or ensuring that high standards must be adhered to more consistently by all, not just those who are members of professional bodies.
If you are a company making an R&D claim, do pause to apply the ‘gut feel’ test – if it feels too good to be true, then it possibly is. Seek a second opinion from a reputable advisor.
