Part 2 – Why use an accountant for your R&D claims?
A recent case with a client of ours perfectly illustrates why you should use an accountant for your R&D claims.
Our client has been given the run around for the best part of a year because of a combination of factors:
- The R&D boutique they used for their R&D claim (and paid a lot of money to) didn’t submit the claim correctly, resulting in delays and confusion at HMRC’s end. The way they submitted the claim (by email) was old fashioned and against HMRC’s stated practice (and so didn’t fit the only process HMRC would accept).
- The boutique was one of the biggest “names” in the R&D claims sector (and one of the most expensive), but they aren’t tax advisers and they don’t do tax compliance – and that was where things started to go wrong. If the R&D claim preparer couldn’t advise on the process to get the money back, then it was no surprise to us that it got stuck.
- The boutique also didn’t advise the client properly on the implications of the claim. The client was expecting more money back than was actually due because of the interaction with the rest of the company’s tax affairs. This is probably because the boutique doesn’t actually have to employ qualified tax and accountancy professionals, and because they don’t advise on everything, they don’t have the full picture. They only commented on the impact of the R&D claim itself rather than assessing how it interacted with the existing corporation tax return.
- Once the boutique had been paid for the claim prepared, they lost interest, and the client’s previous advisers didn’t have experience of R&D claims, so no-one took responsibility for making sure the claim was actually processed until we came on board. We have worked tirelessly to get the position rectified.
This example shows how easily things can go wrong when you aren’t getting correct advice.
The client’s original 2017 return showed a loss, which was carried back to 2016 to generate a partial repayment of tax previously paid.
In December 2019, the boutique submitted revised tax returns by email for 2018 and 2017 which included R&D claims. The 2017 tax return reflected an increase loss, and the maximum amount was carried back to 2016 to get back the rest of the tax paid previously and the balance was surrendered for an R&D tax credit. The 2018 tax return reflected a loss which was surrendered in full.
How did we help?
We took over as agents and the R&D elements of the claims were processed in July 2020 (8 months after the original submission). If these had been submitted correctly in the first place, this is likely to have been done within 6 weeks.
The repayment then received was not in line with what the client expected per the boutique’s advice email. When we reviewed this we found it was incorrect because it assumed that 100% of R&D loss for 2017 and 2018 was surrendered and ignored the fact that some of the 2017 loss had already been used to carry back to 2016.
We worked with our client to reconcile everything and figure out exactly what should be repaid. This was not easy, as neither the boutique nor the previous adviser had pulled together the full picture of what should actually be happening.
We had to chase HMRC several times and none of the deadlines HMRC set themselves to resolve matters by were met. Confusion at HMRC’s side meant that the case kept getting closed without being resolved because the corporation tax team at HMRC and the R&D team at HMRC were not communicating correctly. Again, this would not have happened had the claims been correctly submitted by the boutique).
Ultimately, we had to threaten HMRC with a complaint. We finally managed to speak with an HMRC Inspector who sorted the mess out for our client and the repayment is now on it’s way.
What happened next?
Our client is now 8 months down the line and getting less than they expected, but are happy that we have resolved the issue for them.
Whilst this is an extreme example, we see things like this happening all the time with poor advice from firms who claim to be R&D “specialists”. They charge astronomical fees and aren’t subject to any kind of regulation. Fortunately, the industry standards have been tightened and people offering R&D advice are bound by the industry’s guidance on professional conduct in relation to taxation (PCRT) – if they are qualified!
Using an experienced accountancy firm for your R&D claims will get you timely and proactive advice from a team which understand how the tax compliance (and so the refund process) actually works.
This will ensure that not only is your claim maximised, but the process of obtaining the refund you expect will be as efficient and timely as possible.