Recently, HMRC reported three men to the authorities that were involved in a fraudulent £29.5 million claim for R&D tax relief on a claim that had no merit and have been sentenced to a 21-year jail term. The fraud involved one company paying for services from another company where services and costs incurred never took place and the R&D project was also deemed ineligible.
We already know that HMRC revealed they stopped approximately £300 million of almost £3.5 billion in submitted R&D claim applications due to fraud. In doing so, this has resulted in various changes to the programme that includes, training of HMRC technical staff, hiring of additional HMRC agents and bringing back the PAYE cap (Good News for SMEs- HMRC’s New Draft Legislation for R&D Tax Credits – RDP Associates).
When it comes to fraud, it makes a claimant’s submission that has actual R&D activities, more cumbersome if not now, certainly in the future. How do we know this? We have seen this before in Canada, the USA, and other countries that we work in where R&D tax credit programmes are mature in comparison to the UK. In the UK, it is more likely than not that HMRC will require additional supporting evidence, such as contemporaneous documentation and tightening of eligibility criteria, which will become the standard norm of claim submissions. As such, we are already preparing our clientele on to how to claim the right way and not take a lot of time doing so.
How does this blog involve your claim submission(s)?
First and foremost, if you are given a set of rules to determine what you believe is eligible or are having “joint” discussions with a provider to determine eligibility and your provider is unable to determine what is eligible on their own and because of this, it is highly likely you are leaving money on the table. A professional R&D tax credit provider, such as RDP Associates, has the ability to advise you which of your projects are eligible within one meeting.
A so-called R&D service expert that has asked you to determine eligibility may not know some of the intricacies associated with the R&D tax relief programme, where this fraudulent claim partially comes into play.
For example, who would have the rights to claim the R&D, a company that outsourced the other company or the outsourced company carrying out the services? (Tax Credit Relief in the Context of R&D | RDP Associates While you, as a claimant, may not know the answer to this, and you have hired a provider that missed or does not know these types of rules, HMRC does have the right to issue penalties if a claimant gets this wrong.
So, how confident are you in your provider? Ask yourself the following:
- Am I 100% confident my provider knows all the rules and can advise eligibility in 1 meeting?
- Do they have a system to identify, capture and document R&D on a real-time basis that integrates well with other product development processes?
- Will our R&D provider be there if HMRC comes in to review the claim and are we confident the provider has a good process and reputation with HMRC to defend our claim, and that no penalties will result from a claim submission?
If the answer to any of the above questions is no, contact us so that we may discuss the RDP holistic approach to our services, review your existing claim and how we differentiate from large tax and audit firms who claim they are experts.