Historically, HMRC has checked very few R&D claims which has led to two main problems:

1. Claimants/advisors receiving no feedback on claims they have submitted and taking this as evidence that the claim was ‘successful’ rather than un-checked, so any inaccuracies have gone unnoticed and provided false confidence in a lot of cases.  As the schemes have been around since 2000 there is a lot of misinformation in the public domain which has not been helped by various marketing campaigns by R&D advisors over the years making wildly inaccurate statements, which HMRC should have, but didn’t, challenge at the time.
2. Dishonest advisors have felt confident in submitting invalid claims as they know these are unlikely to be checked – this has become a £multimillion scam.  

The main problem for HMRC has always been capacity – there just wasn’t enough adequately trained staff to check claims.  HMRC now has a lot more staff, but they are still not adequately trained so they are potentially doing more harm than good.

As a positive, they are rejecting many invalid claims but only because they are being unnecessarily aggressive in their approach and so are also rejecting valid claims.    The knock-on effect to this is that no-one knows whether the claim was rejected because it’s invalid or because it’s valid, but HMRC made the wrong call.

Compliance activity should be weeding out the bad advisors but it’s actually doing the opposite as those advisors can now hide behind the excuse that ‘HMRC’s new process doesn’t work.’.

CIOT, a professional body for tax advisors, has been lobbying HMRC on behalf of its members but no one knows how many of these members were giving out bad advice – we have reviewed claims from CIOT members that have been appalling so we know it happens.

HMRC released GFC3 which on the surface appears to be clear guidance on what does/doesn’t qualify but it doesn’t match up with the questioning experienced when going through a compliance check.  There are some examples contained within GFC3 of qualifying R&D activity which would not be approved if such a claim were to go through a current compliance check.

There is still no clarity on what does and doesn’t qualify which is the key to combatting point 1) above.

Please read Thursday’s blog (11^th July) to hear our views on whether HMRC are making headway on combatting point 2) above.

If you have any questions on this blog or anything R&D related, please contact us at [email protected].

Posted: 09 Jul 2024