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R&D Claims companies = Ambulance chasers.

R&D Claims companies = Ambulance chasers. Am I right?

Are R&D claim companies the new PPI / personal injury no win, no fee type outfits?

I have had to fend off a couple this month chasing clients offering untold riches and tax refunds in the thousands all for just one third contingency fee.

I am quite happy to complete an R&D claim for a client if it has merit but neither company (IMO) has that. One sells leather phone cases on Amazon and the other installs saunas so I can't see how the R&D conditions could be met.

In both cases they met with the client and 100% guaranteed they could claim. They suggested increasing Directors salaries so they could claim a bigger chunk.....

I advised the last one that the client would only proceed if they obtained Advanced Assurance to which the company then ran for the hills with a whole load of excuses.

The company itself having only been formed for a year, the sole Director having multiple dissolved Directorships from diverse businesses such as jewellery selling and debt chasing, but in his words:

"In 7 years and over 1000 claims we have never submitted a single one through this process, but have experience in 1 case only where the amounts involved were in excess of £10m being recovered from an exploration company with multiple offshore arms – hugely technical and complicated and the process took 6 months, involved multiple site visits from HMRC and a degree of investigation that was nigh on crippling for the business.

In this single case it was the right approach and the amounts were serious and the risks/benefit was worthwhile. I would strongly advise you not to go down this route however.  Your claim is straightforward and would not warrant the considerable disruption it would bring.  Rest assured that our process will recover all of your R&D expenditure in a quick and painless way.

If you wish to go down the advanced approval route, it is simply not worth our while to proceed as the costs and time involved would not make commercial sense for us and also for you."

Funny that advance assurance is only available to businesses with less that £2M t/o and 50 employees so how he obtained that for a £10M claim I'm not sure.

So have I got my wires crossed? I am just a GP after all and don't profess to be a specialist in these things.

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20th Feb 2019 12:04

Not just R&D companies (though I have little respect for them; like you I prefer to handle these things myself).

But there's also these companies cropping up claiming that they can secure embedded capital allowances claims and promising huge returns, though they don't seem to do much due diligence before they offer this. One client was offered a claim worth £1,000s in tax back. The snag was, he hadn't paid any tax, his personal income being below the tax-free allowance.

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20th Feb 2019 12:42

These companies are a pain in the neck. We lost a client over this. R&D company put a claim in behind our backs and we only found out when huge refund cheques arrived for our client (we were the registered office). Client does no R&D at all and just made up the figures. Now he gets away each year with paying no CT at all. Good luck to the new accountant who turns a blind eye to this

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20th Feb 2019 13:12

My opinion also, anyone offering big kickback for referrals is overcharging at the front end.

Many are off shoots of bigger accountants who seek to poach the work for creating questionable claims that the old accountant didn't do.

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20th Feb 2019 14:33

Are these claims agreed by HMRC before the refunds are sent out or are they possibly subject to future challenge?

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By RedFive
to Kaylee100
20th Feb 2019 15:15

No, that’s the problem.

Only agreed if Advance Assurance is obtained which none of these companies do.

So claim paid out (or tax reduced) as part of CT600 (or previous year amended) per all self assessment of taxes but subject to enquiry / checking down the line.

At which point these outfits are nowhere to be seen.

Client might as well just under declare sales but they seem blinded by the promises.

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20th Feb 2019 15:28

I think there's a place for everyone. I can advise in detail on the tax treatment of embedded plant in buildings. However, I'm not a surveyor so wouldn't even begin to suggest that I knew what qualifying plant there is in a particular property. The same goes (for me at least) for Research and Development. I can advise on the tax treatment but I'm not a scientist or engineer.

The problem is that there is no regulation and there will always be fly-by-night operators out to make a quick and easy buck, especially with the growing incentive of increased tax savings over the years. The accountancy and tax profession is little different.

I work with a long-established firm of Research and Development consultants who file a detailed report with every claim, fully setting out the criteria and explaining how they are satisfied. In over ten years, only one claim has been questioned by HMRC and that was resolved swiftly with no adjustment required.

So while there are undoubtedly cowboys out there it is unfair to tar everyone with the same brush.

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to Wilson Philips
21st Feb 2019 09:56

Yes, I tend to agree. I've dealt with and have brought in experts for embedded F&F in buildings and it actually makes sense but, as the Op says, where I have a problem is with the definition of R&D.

I spent ages with one website-based business going over the criteria for R&D as far as it related to building a website to provide a service (app) no different to many other businesses already doing the same.

I came up with the view that they didn't qualify and this was backed up by the auditors, but the company went ahead anyway and got its Kgs of flesh out of the country's coffers (sorry pejorative I know).

Another web app client has just received a huge sum in R&D credit, arranged by a dedicated R&D practice that, as far as I can see, is not populated by cowboys/girls, so, perhaps it's another case of badly writing tax legislation enabling anyone with the knowledge to take advantage of omissions and getting money for expenditure not envisioned when .GOV first had the idea?

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