Why use an accountant for your R&D claims?

The R&D tax credits market has historically been extremely unregulated –the generosity of the schemes means they are ripe for abuse and we have seen some extremely dubious claims being made by unregulated “R&D specialists” for activities where we would struggle to see how an “advance in science or technology” could be demonstrated.

As the recent case of AHK Recruitment Limited & The Commissioners for HM Revenue & Customs has shown, HMRC can and will challenge R&D claims if they don’t believe R&D has been proved to be taking place.  

The National Audit Office have recently warned that they regard “poorly put together R&D claims” as the biggest area of tax risk for the UK Exchequer. R&D claims are based on tax law, and HMRC not only police tax proactively but can and do issue penalties for what they consider to be negligent claims and so quality control is not just on the agenda of the NAO, but should also be on the agenda for businesses making R&D claims. 

New regulations

Fortunately, the accountancy industry (and specifically the ICAEW and CIOT) is leading a move towards more stringent regulation with a few new developments and clarifications. This is a positive step for the R&D claims market as it should raise the bar for qualify control.

The relevant professional bodies have clarified that any advisers making/submitting or assessing R&D claims should adhere to the “Professional Conduct in Relation to Taxation” (“PCRT”) guidance which sets out fundamental principles members of these professional bodies must adhere to.

R&D advice is tax advice and, ultimately, if the advice is wrong, it will be the client who has to pay the price. The PCRT guidance means that we, as qualified and regulated advisers, have to apply the same standards to R&D advice as we would to any other advisory work. We have to be competent to advise you on R&D. Firms who are not members of a professional body don’t have to be competent to advise you on R&D.

Do your research

So be aware that if you’re going for an “R&D Specialist” who isn’t qualified or a member of a relevant professional body, they probably know less about these standards than you do, and it’s your business that will be penalised if they get it wrong. Watch out for far fetched claims and round sum estimates of your claim based on very few details – it’s impossible to accurately assess a likely claim without a proper understanding of your business.

The guidance also confirms that anti money laundering (“AML”) regulation and compliance applies to R&D services as it would to any other services, as the provision of advice in relation to R&D services is “accountancy services” under the money laundering regulations.

Providers of R&D therefore need to be registered and supervised for AML compliance, if not by a professional body then by HMRC. Failure to comply is a criminal offence. We have come across firms who don’t think this is the case but we now have clarity.

Benefits

This is why we would always recommend using a reputable accountancy firm for your R&D services. You will get the following benefits:

  • It will probably be cheaper (and if they are your Auditor, it’s likely to be a fixed fee rather than a success fee)
  • The team involved are likely to be qualified professionals who have an appropriate tax/accounting background as well as experience with R&D claims in a range of industries
  • The advice you get will be governed by the PCRT – giving you peace of mind that the claim is more likely to be correct and within the bounds of the law

Other blogs in this R&D series

Episode 1 – Not all R&D is qualifying R&D
Episode 3 – The impact of the Coronavirus Job Retention Scheme on R&D
Episode 4 – Consultation on data and cloud computing – qualifying expenditures for R&D tax credits

Contact us

If you’re worried about the accuracy of your R&D claims or the advice you have had in the past, get in touch and we will help you.

For further advice, please contact Hollie Thompson at hollie.thompson@taitwalker.co.uk.