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R&D Credits

Aggressive claims

Im slightly shell shocked that a client of mine has completed and R&D claim through a specialist and claimed £65k of R&D expenses over 2 years - tax credit @130%.  They have claimed for the directors wages, sub contractor costs, software costs and some consumables.  This is a v small Ltd co, Turnover is less than £150k.

I didn't even think they really did R&D.  They design websites for clients.... nice slick looking websites but nothing that hasn't been done before (in my opinion).  has anyone come across this before?  Should they worry about HMRC in the future or do I need to upskill on this stuff so I can spot it?

 

 

 

 

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26th Mar 2019 15:44

I only know what I have read on here and that suggests that some "specialist" companies are making very questionable claims on behalf of clients.

If you haven't been involved, I'm not sure you have anything to gain by digging. If you find anything that points to an incorrect claim, you would have to advise the client to disclose (presumably).

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By thomas
to Accountant A
26th Mar 2019 15:53

Accountant A wrote:

I only know what I have read on here and that suggests that some "specialist" companies are making very questionable claims on behalf of clients.

If you haven't been involved, I'm not sure you have anything to gain by digging. If you find anything that points to an incorrect claim, you would have to advise the client to disclose (presumably).

I'm worried I have missed something - this is huge for my (now ex) client. I just really didnt see a claim of anywhere near that magnitude.

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to thomas
26th Mar 2019 16:05

thomas wrote:

I'm worried I have missed something - this is huge for my (now ex) client. I just really didnt see a claim of anywhere near that magnitude.

Why are you worried? Not your client any more and you have insufficient knowledge (the law and the specific circumstances) to be able to form a view that might cause you to conclude suspicious activity.

You could spend lots of time on it but why would you now bother? It's not going to earn you a fee, is it?

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By Mr_awol
to Accountant A
26th Mar 2019 16:51

Presumably he's more worried he's missed out on giving the client some advice and (by extension) may have omitted to advise others too?

TBH I wouldn't worry too much OP - you almost certainly haven't missed something 'of that magnitude'. You might have missed *something* though

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By thomas
to Accountant A
27th Mar 2019 12:04

Accountant A wrote:

thomas wrote:

I'm worried I have missed something - this is huge for my (now ex) client. I just really didnt see a claim of anywhere near that magnitude.

Why are you worried? Not your client any more and you have insufficient knowledge (the law and the specific circumstances) to be able to form a view that might cause you to conclude suspicious activity.

You could spend lots of time on it but why would you now bother? It's not going to earn you a fee, is it?

My worry is whether I should have spotted this. The client is gone - he's over the moon with his decision to engage the R&D specialist. I wonder if I should be talking to clients more about R&D and referring them to specialists. I just didnt think web design was R&D.

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By Mr_awol
26th Mar 2019 16:53

Your client's modest turnover, and the types of costs they've claimed, don't automatically mean there is no R&D claim. The key thing is understanding the work carried out.

The specialists push the limit of what is claimable (normally in a very aggressive manner) but if you read one of their reports they are very convincing and leave you almost believing that a claim is justified. In fact it possibly is in many cases - and the middle ground is probably where we should be aiming. Unfortunately if you read the legislation, including phrases like 'ground-breaking' and 'scientific uncertainty' you'd think nothing would ever qualify unless it's a bloke in a white coat juggling test tubes and inventing new medicines, etc.

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to Mr_awol
02nd Apr 2019 14:45

Mr_awol wrote:

Your client's modest turnover, and the types of costs they've claimed, don't automatically mean there is no R&D claim. The key thing is understanding the work carried out.

The specialists push the limit of what is claimable (normally in a very aggressive manner) but if you read one of their reports they are very convincing and leave you almost believing that a claim is justified. In fact it possibly is in many cases - and the middle ground is probably where we should be aiming. Unfortunately if you read the legislation, including phrases like 'ground-breaking' and 'scientific uncertainty' you'd think nothing would ever qualify unless it's a bloke in a white coat juggling test tubes and inventing new medicines, etc.

Nowhere in the legislation is the term "ground-breaking" used. And the full phrase is "scientific or technological uncertainty".

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26th Mar 2019 16:28

https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-...

"To get R&D relief you need to explain how a project ...
couldn’t be easily worked out by a professional in the field"

"You should be researching or developing something that isn’t known to be scientifically or technology feasible when you make or discover it."

Must be impressive websites that they design!

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26th Mar 2019 16:46

There's a lot of it about.

A client of mine has used one of these slick outfits against my advice. If HMRC come a-knocking I won't be representing them on it. Somehow, I doubt the specialist will, either.

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to andy.partridge
26th Mar 2019 16:52

andy.partridge wrote:

There's a lot of it about.

A client of mine has used one of these slick outfits against my advice. If HMRC come a-knocking I won't be representing them on it. Somehow, I doubt the specialist will, either.

It's a shame HMRC don't carry our cursory checks when doling out our hard earned taxes. They must have audited some claims and found them wanting? Do they not "sense check" claims for the scale compared to the size of the business and the nature of the business?

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27th Mar 2019 10:01

There have been loads of adverse comments about sharp practices re R&D claims here before and I believe at least 50% of R&D claims are spurious. See:

https://www.accountingweb.co.uk/any-answers/rd-claims-are-we-missing-a-t...

As a taxpayer I also resent the fact that HMRC is lazily doling out huge sums of money (i.e. my hard earned money) to these people without proper checks & oversight.

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to Justin Bryant
27th Mar 2019 10:22

Justin I didn't know you were a taxpayer. I though you were a fan of technical tax schemes to convert your income into loans and thus legally (in your opinion) avoid tax!

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By Mr_awol
to ireallyshouldknowthisbut
27th Mar 2019 12:13

You beat me to it.

Perhaps if the R&D companies spuriously claimed they were just 'borrowing' the tax credits, it would suddenly all be ok.

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27th Mar 2019 10:24

I have several web design clients and none of them doing anything close to R&D.

Its just designing templates, and a bit of code tweaking.

Coding itself does not mean R&D.

I do have a coding client who does qualify, and they have developed some genuinely groundbreaking tech in how graphics are processed.

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