We are now starting to see enquiry letters from HMRC with regard to
Research & Development (R&D ) Claims made by clients.
In all cases the claims were made by clients who used the services of 3rd
party “R&D Claims companies”
HMRC clearly did not anticipate the spectacular increase in claims being
made as a consequence of the R&D legislation & the benefits to be
gained.
This, of course, has led to a market place in which some unscrupulous
companies have received significant fees for assisting companies to make
R&D claims, many of which would in reality never meet the HMRC criteria.
Companies are increasingly finding “that if it sounded too good to be
true then it probably was".
Enquiries being sent out by HMRC seem to be very much on the offensive –
We think the claim is wrong so you need to now prove it was correct.
The problem is that if a claim is found to be incorrect then interest
& penalties will follow.
In the event of a wrongful claim, HMRC are duty bound to consider
penalties and mitigation is based generally around the following principles :-
1/ Did the company ( not the 3rd party advisors) fully
understand the R&D Guidelines?
2/ How did the company come to the conclusion that it qualified as
R&D?
3/ Did the company seek advice from its regular accountants or just rely
upon what a so-called “ R&D specialist “ told them?
4/ Has the company ever discussed R&D previously with HMRC?.
5/ Why did the company decide to make a claim? – it is not sufficient to
say “ we relied upon someone who told us they were experts”
The core problems with claims made appears to be that they are based not
upon true innovation but upon extending something which already exists albeit
perhaps in a different format.
HMRC have said that in the worst cases of mis-claiming, they wii punish
those involved by naming & shaming them That is it seems, hardly a dis-incentive
If
companies wish to make an R&D claim we would encourage them to check with
us first as to the validity – penalties can be very expensive
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