R&D Claims: HMRC Tightens Restrictions

HMRC wrongfully awarded £311 MILLION in R&D claims. Now, they’re securing their coffers.

R&D Claim
R&D Claims

(4 minute read)

Today’s tax tip is all about:

  • Why there’s so much non-compliance in R&D claims
  • HMRC’s tightening of R&D claim restrictions
  • How you can protect yourself and remain compliant

In 2019, UK companies claimed tax relief of £47.5 billion for research and development costs. Yet estimates suggest that only around £25 billion worth of R&D was carried out by UK companies.

This gap is too huge to be explained solely by overseas developments.

So, what’s happening?

Why is R&D Claim Non-compliance so High?

HMRC cite non-compliance as the reason behind the number disparity.

They highlight a concerning growth of irresponsible R&D advisors who cold-call small and medium businesses with claims that they can get R&D tax relief.

The businessowner’s are often unaware that these ‘advisors’ have little or no tax background and aren’t part of any professional body.

Businessowner’s trust their advisors to look out for their company. But instead, they submit dubious R&D claims in the hopes that one will stick, whether the business is eligible or not.

As a result, the company risks being caught out by HMRC.

What are HMRC doing?

In response to growing concerns, HMRC have unveiled a slew of new changes to R&D claims.

These include:

  • Providing more resources to existing compliance teams to manage the increasing number of R&D claims
  • Creating a new team focused on preventing abuse of the system
  • Moving R&D claims online and requiring more detailed information on all claims
  • Needing companies to declare their intent to submit an R&D claim in advance
  • Requiring that a named senior officer in the company endorses the claim
  • Requiring that companies provide the details of any advisors they worked with during the claim process

These changes aim to improve compliance by discouraging both deliberate and accidental non-compliance. By demanding information on advisors, HMRC may be aiming to identify and stop malicious advice.

However, despite the steps HMRC is taking, you should always be careful when taking R&D claim advice.

Protect your Business and Your R&D Claim:

There are some steps you can take to keep your business safe from irresponsible advisors:

  • Read testimonials

Look into past client reviews to make sure they’re positive.

It may not be enough to simply see an average rating, as companies may buy 5-star ratings to appear legitimate.

As a result, it’s best to look for full testimonials and to check that they’re left by real businesses. (You can read ours here.)

  • Check if they’re part of a professional body

Professional bodies hold members to high standards. Joining such a body shows a company has reached those standards and is likely reputable.

For example, Tax Expert is part of the well-regarded ACCA (the Association of Chartered Certified Accountants).

What Now?

The rule changes aren’t due to take effect until 2023 so there’s plenty of time to prepare.

If you have any questions about R&D claims or would like help with making one, our reliable team has years of experience.

Call us during office hours at 01772 788200 (or Whatsapp us out-of-ours at 07787 010190).

You can also leave an e-mail enquiry via the short form below.

Kind regards Ilyas