Hi,
Our client has engaged an R & D agent to submit a claim for the past two CT periods. the client is a fruit and vag wholesaler selling to restaurants and bars as well as schools and colleges. the company has been trading for approximately 12 years and whilst the business has grown over that period, the basisĀ of the business remains the same. They operate from the same premises and whilst the vans and fridges are upgraded as they either fail or additional capacity has increased, the general model of the business remains the same (other than the addition of an online sales portal for the general public during the lockdown).
I am concerned the client has not engaged into genuine research and development and may be open to an enquiry and potential penalties at a later date as no R & D has taken place, presumably after the R & D agent has taken his 25% and does not accept liability. I have asked for details on what basis the R & D claim is being prepared and am yet to hear back.
What are your thoughts? And do we have an obligation to report if we do not receive a satisfactory answer?
Replies (27)
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I suspect the R & D firm wont provide you with an answer, to protect against you using the knowledge to do the clients next returns and them missing out on their fee
I'd leave it alone
I suspect i had one of those wholesaler clients once. Well not the fruit so much. Officially her occupation was 'model'
The R&D claim industry appears to be a scam supported by the lack of verification by HMRC. The refunds are paid fairly promptly and the "specialist advisors" will be no where to be seen if there is a subsequent review in a few years. These will be the same people who were peddling EBTs and FURBS to your clients 20 years ago, and as with "loan" scam it will be the client not the adviser who picks up the tax, penalty and interest.
Have you asked the client what R&D they has carried out, presumably they have all the research and development documented to back up the claim?
Judging by some of the nonsense ive seen, it could be the creation of a new corrugated/formed cardboard layer to separate and protect produce.
Remarkably similar to the system used by every supermarket, wholesaler, greengrocer, etc for their own eggs and avocados, but dressed up as some new use/invention.
By reading just the headline of your post I thought "scam"
Having read the text of your post i have not changed my view.
It seems very unlikely such a business is undertaking genuine R&D activity.
Assuming the claim is as we assume highly dodgy, I would represent that to your client in the strongest of terms. You may like to say to "The R&D company presumably they told you that your accountant would not understand this and/or say it was not allowable, so as to pre-empt this conversation and make them believe them and not me"
Its what all con-artists do.
Has the R&D agent subnitted the (revised) return or are you being asked to do so?
If the former, I would let it go, but put it in writing to client that any enquiries that arise will need to be directed to, and handled by, the agent.
If I were being asked to submit the return I would insist on full details of the claim before doing so.
For the few such claims that we submit (most of our claims are done by ourselves) we include an unambiguous disclosure note to the effect that the claim has been prepared by a 3rd party agent and has not been subject to any form of audit by ourselves.
We refuse to resubmit any returns that have been amended by an R & D Agent, if they are that sure that a claim can be made, they can get the appropriate agent authorisations in place and put their own name to it as far as I'm concerned
Possibly a little harsh, although I can understand.
We are an engineering company, and have previously used an engineering based consultant to do our R&D claim. Usual accountants quite happy to resubmit.
Of course in our case we naturally supply a copy of the documentation and claim workings.
The claim will most likely be for the portal but if it's not anything new then the R&D claim will not pass scrutiny by HMRC... eventually. Then the agent that did it has already run away.
I had a 'R&D specialist' contact me on LinkedIn guaranteeing that I could make a claim myself. I sit at a desk and do accounts all day so I'm tempted to see what he could suggest
I have warned the client I don't feel the claim is genuine and that there may be penalties and interest to pay is (when) HMRC deem the claim invalid.
What was the clients reaction? Although you are spot on, it is difficult to get this message across without it appearing sour grapes. It seems that clients view these R&D 'specialists' as alchemists with a far deeper understanding and experience of R&D than us 'ordinary' accountants. It makes us look complete chumps.
I understand the HMRC R&D Threshold is low and subjective but for a fruit and vegetables seller this is boarding on the ridiculous. It is immoral and dishonest
The chances of HMRC picking this up is about million to one.
If my client went ahead after expressing my concerns I possibly would question if I would want to keep such a client. Though I understand it does put you in a difficult position.
I've had a similar issue with a bricklaying contractor this week.
Brings in a load of subbies to build a house, nursing home etc.
Apparently, the contractor saying to the architect that they need to change this and that as it won't work is r&d.
Seems crazy to me but the firm us run by an ex HMRC inspector, so all must be OK......yeah right.
Ask your client how many patents he has been granted, or he has even applied for, as a result of his R&D.
Non-sequitur. Not a single one of our clients has (as far as I know) applied for a patent in respect of qualifying R&D since its inception.