One of HMRC’s current approaches to tackling non-compliance within the R&D regime is issuing ‘one-to-many’ letters. Such letters form a key part of HMRC’s arsenal in deterring companies from making R&D claims which they believe are not compliant with legislation and published guidance.
The recent updates to the government website, outline that HMRC is also explicit in its assessment that a variety of sectors will be unlikely to have valid R&D claims. This includes care homes, childcare providers, personal trainers, wholesalers and retailers, pubs and restaurants.
In line with this sector-wide approach, the Chartered Institute of Taxation have just released an example of one of these one-to-many letters – in this case directed at nursing and care homes. The letter also notes that unfortunately, the sector is one of those most often targeted by less scrupulous agents, and as such, management teams need to do careful diligence before engaging with an advisor to help them prepare claims.
Whilst one-to-many letters have been used for some time to give encouragement for specific behaviours, this letter seems to be much more targeted and demonstrates HMRC’s frustration with the practices of certain players in the R&D credits marketplace. On a positive note, hopefully it also helps to raise awareness with management teams of what ‘genuine’ R&D activity is, and helps provide balance to the more aggressive sales techniques often employed by some advisors to persuade a company to engage their services.
The quality of some R&D services providers, and ill-considered (and sometimes fraudulent) claims in businesses with low technical merit or little credible consideration, have caused the wider advisor community considerable frustration for some time. However, the seemingly blanket approach to entire sectors is also concerning; R&D claims need to be taken on merit and the quality of the underlying science and technology should be paramount.
Penalties for incorrect R&D claims are becoming commonplace
It is becoming increasingly common for R&D claims to be partially or even fully rejected and for fines or penalties to be levied. Companies should be cognisant of the doggedness of some agents in attempting to persuade businesses in low-tech sectors to pursue R&D claims. Bearing all these factors in mind management teams should be asking themselves, not only what have other businesses claimed, but rather, if challenged by HMRC, on what basis can they genuinely support the claims for advances in science and technology?
What should care provider businesses be thinking about now?
From 8 August 2023, the introduction of the online additional information form requires the supply of an agent name and that of a named individual from the company. This step is aimed at encouraging company directors to take responsibility for the claim being made on their behalf.
The form means that visibility of claims support and projects included will be front and centre. Now is certainly the right time to get R&D claims carefully considered and compliant with the most recent guidelines.
How can RSM help?
James Tetley, Partner Innovation Reliefs | DL: +44 2380 646406 | M: +44 7436 268314 | email@example.com
Lizzie Gosling, Director Innovations Reliefs | DL: +44 20 3201 8767 | M: +44 7483 905276 | firstname.lastname@example.org