HMRC introduced R&D tax credits in 2000. Since then, the number of R&D specialist advisory companies, like DSM, has grown. We love our niche. We know we’re experts and enjoy being companies’ bolt-on R&D department for as long as they need us.
It’s exciting to be working with innovators, whatever the industry. And incredibly satisfying to know that we are responsible for getting our clients substantial amounts of money to invest in their next research and development projects.
But not all R&D tax relief companies have the same high standards as us.
Our respected competitors also use their detailed knowledge of R&D tax relief regulations to help their clients submit bespoke, accurate claims. And get the legitimate R&D tax relief amount they are entitled to.
The problem lies with unscrupulous companies that do not function with same level of integrity.
It’s important for us to highlight this issue for two reasons. Firstly, it damages the good reputation of our entire industry. Secondly, there are considerable negative consequences for the businesses involved and we’d like to help you avoid them.
What are the negative consequences of working with a less reputable R&D tax relief company?
No matter who you trust with any of your accounting matters, the responsibility for your company’s tax position lies with you. If a company makes a deliberately false R&D tax relief claim on your behalf, you are liable for the penalties. Some criminal companies are doing this, even sometimes claiming R&D tax credits for projects that never existed.
Consider how you found the company. Cold calling you is not a good sign. The only job of the person you speak to is to get as many people to sign up as possible, because they are being paid on commission. It’s in their interest to make it sound like you are more than likely to meet the criteria for an R&D tax relief claim. But what are their qualifications or experience? How do they really know the scope of your projects on the strength of one high pressure sales call? They don’t.
If HMRC discover inaccuracies in your claim, they will start an investigation. They will be looking to see if there has been genuine errors, or an attempt to make a deliberately false claim.
Real mistakes can be given a ‘nil’ penalty, which means there is no fine to pay. You may have to make changes to your systems, which will be checked at a set date. If you took ‘reasonable care’ during the preparation of your claim, and if you co-operate fully with the investigation, you have a better chance of this outcome.
But if your company’s R&D tax relief claim is found to be intentionally inaccurate, you can be given a maximum financial penalty of the tax lost to the government – i.e. the amount of tax relief you received.
Imagine that you entrusted your R&D tax relief claim submission to an unscrupulous company that have taken their fee and conveniently disappeared as soon as HMRC need answers. You can pursue them as a separate legal undertaking. But you are the one left to resolve matters with HMRC.
How to recognise a shady R&D tax credit advice company
They may well have a professional looking website and talk to you in terms of ‘allowable costs’ and ‘qualifying expenses’. But are they really what they seem?
It’s not difficult to protect yourself from a rogue trader in our industry.. Most people that are R&D tax relief advisers will have initially worked in a broader area of tax or accountancy first and will hold those relevant qualifications. Check out the named individuals in the company with the professional bodies that certify their qualifications. These organisations have a register and you can contact them independently to verify their legitimacy.
All the usual, common sense things apply. Get a recommendation from someone you know. Check out their testimonials. Find out how long they have been in business. Look up their business’s status with Companies House. And if it just doesn’t feel right, even if you can’t put your finger on why, don’t engage with them. There’s too much at stake.
What is the solution to this situation?
Well, HMRC are cracking down on wrongful tax relief claims. They are currently chasing £612 million in R&D tax relief and £90million Patent Box claims from last year. That’s a huge amount of ‘tax under consideration’. What none of us want to see is the Tax Office clamping down on the availability of R&D tax relief. And this is an option open to them. If too many people are abusing the system, then that system will have to change. Or close entirely.
Another option that many industry members are supporting, is to have specific regulation for companies that set up as R&D tax relief specialists. Having a body dedicated to monitoring, registering and regulating our industry is one effective way to weed out any unprincipled companies. This benefits any companies that are looking for professional help with their R&D claim, and the industry as a whole.
Both R&D Tax Credits and RDEC schemes are amazing opportunities for investment in innovation. They’re truly excellent tax reliefs. Don’t be dissuaded from making your application because of this fear. Just do your due diligence before you hire your R&D tax relief specialist. With us, you’ll get everything you’re entitled to without any worries about over claiming or penalties.