Research & development tax relief update: avoid becoming the victim of the latest tax credit swindle
Processing claims for research and development tax relief has become the latest PPI style telephone scandal in Manchester and across the UK. This blog explains if you are eligible for an, often substantial, tax credit and the pitfalls to look out for.
In recent years, in a bid to stimulate the updating of British business, the Government has been offering enhanced tax relief on research & development (R&D) expenditure. There are significant savings to be gained and as a result, many of our clients have been approached by unqualified and unscrupulous organisations purporting to have extensive and detailed knowledge of the tax system.
Unregulated R&D tax relief consultants
Unlike chartered accountants, the majority of so-called, research & development tax relief ‘consultants’ have no training and are not subject to any form of regulation or governance. They tell you they have an in-depth knowledge, not only of your company’s tax affairs, but also the technical specifications of the products and processes which define your business. They promise the earth and tell you “the proof of the pudding is in the tax rebate”. The cheque arrives from HMRC, they take an inflated cut then head for the hills.
They don’t tell you that your claim will mean:
- accounts which have already been accepted and agreed will be reopened, giving HMRC an additional two years to interrogate your finances.
- although they’ve had their “success fee”, HMRC can still look into your claim for the next six years. Enthusiastic salespeople and cold-callers can sometimes exaggerate what should be considered as true research & development. Will the tele-sales person still be around in the future if HMRC query your claim?
HMRC ‘nudge’ letters
It has recently come to our attention that HMRC have issued a number of ‘nudge’ letters to companies which have previously claimed R&D tax relief, perhaps using one of these unregulated consultants. The decision to issue letters to claimant companies is a clear illustration that HMRC are taking a renewed interest in R&D claims. In the March 2021 budget, a wide-ranging consultation on R&D tax relief was launched, examining many aspects of the relief. We expect that any companies ‘caught’ making incorrect claims after having received one of the ‘nudge’ letters will be subject to higher penalties.
Are you eligible for a research & development tax credit?
If you are involved in any kind of new product development or improvement you may be eligible. This can be anything from making bespoke products for individual customers to creating specialist computer programmes. We are happy to advise on qualifying activities.
For a valid claim to be submitted, a report must be filed with HMRC explaining what work has been undertaken and how this is expected to make your business more efficient or profitable. We have extensive experience of presenting your spending on improvements in a way which is most likely to support a claim for enhanced R&D tax relief.
Substantial R&D tax savings
Research and development tax relief is a great opportunity. When your claim is accepted the tax allowance can total 230%. This is by far the highest value tax subsidy available in the entire fiscal system.
We have successfully made dozens of research & development tax relief claims for our Manchester clients, many resulting in a refund in the tens of thousands. We’re happy to help with your claim and provide a fully managed service to ensure this happens smoothly.
If you have the slightest inkling that you may be entitled to this generous tax relief or you are wondering if it’s worth speaking to one of our specialist tax accountants, please give us a call and we will let you have the facts.
“We were over the moon to get a £10,000 R&D refund from the HMRC. We didn’t realise we could apply until Chadwick’s recommended it to us. They helped us every step of the way.”
Paul Birkin, Manchester