As anyone involved with R&D claims will be aware, for some time the ISBC R&D Tax Credit Compliance Team has been using “Open source research”, aka internet searches to look for similar technology to that being claimed and using this as a way to reject claims.

In some cases this can be justified, where it’s obvious that the development being claimed for isn’t new and won’t create the necessary advance. In other cases, however, HMRC will have made an error as the technology found:

• isn’t even remotely similar
• doesn’t even exist despite there being very nice-looking marketing material claiming that it does
• didn’t exist at the time that the claimant’s project was undertaken
• is similar but actually differs in ways which could be described as appreciable

HMRC’s tendency to take everything it reads online at face value has become very frustrating, especially as it often doesn’t have the technical knowledge to understand the information it is reviewing, but these errors can usually be cleared up as long as the claiming company is given the chance.

BUT, HMRC often won’t release details of the ‘similar’ technology it has found and so refuting these similarities can be impossible during a compliance check.

It’s important to realise that a compliance check isn’t the last step, and a SOLS review, ADR or tribunal may be necessary to get HMRC to identify what the ‘similar’ technologies are.  It shouldn’t be necessary to go this far but it increasingly is.

HMRC seems to be hoping that by making the process of a compliance check as difficult as possible, many claimants will give up, but itis important that valid claims are given the chance to succeed.

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

Posted: 04 Jul 2024