We recently ran the numbers and 50% of the prospects we speak to are not eligible for Research and Development Tax relief.  It’s easy to see these calls as a waste of time but we see them as a vital service.

R&D tax relief has been around for over 20 years but in the early days the definition of what kind of activities could be considered as qualifying was deemed to be very narrow.

About a decade ago, a lot of advertising around R&D tax relief was aimed at getting UK companies to understand that a lot of the problem solving they considered as ‘just doing their job’ could actually qualify.  It wasn’t just scientists in labs that could benefit but engineers, architects, software developers to name but a few.

This was a good and accurate message, but it’s gone too far the other way and now companies are being advised to make a claim when they don’t meet the criteria of a qualifying company.

There are two main reasons for this, one a bit more troubling than the other.

Many R&D advisors advertise case studies of companies they have helped claim R&D tax relief.  From these case studies, the companies obviously don’t meet the criteria, but the advisor clearly thinks they do which is very worrying and speaks to the quality of advice they are giving out.

The reason that such advisors think they understand R&D tax relief is that they are not getting feedback from HMRC when the claims they submit are ineligible as HMRC do not check most R&D claims.

This leads us onto the other reason that erroneous claims are being submitted.  There are those out there who realise that HMRC do not check most R&D claims and take advantage of this by encouraging high volumes of companies to submit claims whether they are eligible or not.  The companies themselves are told by the ‘expert’ that they qualify, have no reason to believe otherwise and in most cases seem to be successful in the claim.

In both cases, these companies are opening themselves up to potential problems or fines further down the line.

This is why 50% of our calls being to non-eligible companies is a good use of our time.  The more accurate advice that we can disseminate, the fewer companies there are opening themselves up to the potential of large fines and other issues.  There are also less claims clogging up the system meaning that HMRC can check a higher percentage..

Posted: 23 Sep 2021