I’ve just had an article on R&D tax relief pointed out to me. It appears on the website* of a national newspaper under the by line of one of their journalists, although it would appear to rely heavily on information and quotations provided by one firm of advisers. After reading the article I’m left feeling a little angry.
Now, don’t get me wrong, clearly I don’t have a problem with an article promoting the R&D tax relief regime. I’m not even particularly concerned that it is really little more than an advertorial promoting a “competitor” – it’s a big market place and fair competition is good for the soul.
No, what I have a problem with is the fact that the article is riddled with misleading inaccuracies about the relief. Given that these inaccuracies will have come (I assume) from the firm of advisers, it must mean that invalid claims are being made (and accepted by HMRC). Actually, this is something backed up by my own experience, both in talking to prospective clients and in reviewing claims already prepared. A lot of people have jumped on the R&D relief bandwagon without really bothering to properly understand how the legislation works.
HMRC simply does not have the resource to enable it to properly review all of the R&D claims it receives. Of course, given that we operate in a self-assessment regime, it shouldn’t be reviewing every claim in any case. Unfortunately, my belief is that even after it has applied a risk assessment, there are a lot of smaller claims that are simply processed without any specialist HMRC input at all. For what it’s worth, I know that those in the R&D teams within HMRC would very much like to have the resources to enable them to look more closely at many more claims. Some improvements are in train but I fear they may be small improvements.
Why does this matter? It matters because companies are being advised to make claims which are inaccurate, leading them to claim relief to which they are not entitled. HMRC doesn’t review the claims (for the reasons I’ve outlined already), so the companies have their tax bill reduced or receive a payable credit based on an invalid claim. Government money is being used to fund projects that don’t actually qualify for the incentive.
* I’m not going to link to the article, for two very good reasons. First, from the perspective of promoting R&D relief it is a bad article, so why would I link to it. Second, I really don’t want to name the firm of advisers behind it – not for any regard to their feelings but because I consider myself too professional to criticise them in public.