HMRC tightens R&D tax relief compliance

11th May 2022
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Upcoming changes to R&D claims in April 2023 will bring improvements to industry standards. How can you protect your clients while we wait?

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The problems caused by unethical R&D advisors have had a real impact on accountants and SMEs. Fortunately, this has not escaped HMRC’s attention, which is limbering up to tighten the rules from April 2023

One key change is that SMEs will need to disclose the name of their R&D advisor, making it easier for HMRC to focus their enquiries on the worst offenders.

Why there’s a problem with R&D ‘experts’

There is no barrier to entry to becoming an R&D ‘expert’. Anyone can set themselves up with a website saying that they too are the ‘UK’s leading expert in R&D tax relief’.

Lured by lucrative fees, so many consultants have entered the R&D market that it’s resembled a goldrush. In the scramble, claims have been submitted for completely inappropriate companies - children’s nurseries, pubs, care homes and stables – often with virtually no input from the client. 

How do low-quality R&D claims affect accountants?

When a low-quality consultant starts chatting with clients in your portfolio, it can create serious headaches for you. It’s hard to talk the client down from what they’ve been promised, as they’ve already factored their ‘entitlement’ into their plans. You can even be seen as a blocker. 

But if you submit the claim and it’s questioned, you run the risk of endangering your relationship with HMRC. Either way, the client relationship can get strained, and they can have to pay back funds and even penalties.

Standards in the R&D industry should be higher

We hope that HMRC’s changes will improve standards across the industry. Poor-quality providers will get found out by HMRC and hammered with enquiries, and negative reviews from SMEs. This opens up space in the market for high-quality providers to compete on great service, instead of cheap pricing.

… claims will need to include details of any agent who has advised the company on compiling the claim.

via HMRC’s Report on R&D Tax Reliefs, para 2.36

However, these changes will take time to come into effect, and they’re still far short of proper industry regulation. We’d love to see HMRC move faster and go deeper in its reforms.

What you can do right now to protect your clients

If you’ve been struggling to talk clients out of claims they shouldn’t be making, or you’re uncertain about the quality of what’s passing across your desk, there are steps you can take right now!

You can learn how to apply the eligibility criteria, so you can be clear and confident when talking to clients about the claims they’d like to make. And from there it’s only a short step, if you want to take it, to preparing claims for clients yourself. 

Starting your own in-house R&D service, or formalising one you already have, is a great way to protect your clients, and increase your profitability. If you’re considering it, read our recent article 5 things that successful accountancy firms do when bringing R&D in-house.

Where to get the R&D training you need

We’ve scoured the market for good quality, in-depth training on eligibility and claim preparation, and have come up empty handed. 

That’s why last year, we founded The R&D Community and started building an online R&D training academy with full support for accountants baked in. The software platform gives you a convenient way to train yourself and your staff in R&D, and we also offer a helpline support service for members. 

If that sounds like a good fit for your accountancy practice, we’d love to hear from you!