With increased scrutiny of the R&D tax relief scheme by HMRC, accountants are having second thoughts about keeping this service in-house. Is now the time to re-evaluate the benefits of a compliance-led partner to support you in the preparation of your clients’ R&D tax credit claims?
Non-compliant R&D tax relief claims – are accountants at risk?
The R&D tax conversation is currently focused on compliance enquiries and the increasing demands of HMRC. Many people believe that HMRC have moved the goalposts and raised the standards of the scheme. The reality is that nothing has fundamentally changed other than the scrutiny and policing of the scheme. The compliance demands are no different.
This has raised concerns with many accountants I’ve spoken to. Historically, they have been comfortable supporting clients by pulling R&D tax credit claims together internally. This has been viewed as straightforward, with the client providing an overview of the activity undertaken and their view of what R&D is, and the accountant formulating the financial report that aligns with the perceived R&D activity. Questions are now being asked – is this sufficient and is there confidence in compliance?
Have accountants lost their appetite for handling R&D tax relief?
R&D tax credit claims are increasingly becoming a headache for many accountants. The concern over compliance, the increased risk of an enquiry, and the demands on time and resource. Accountants are reporting difficult conversations with clients who are dealing with complex enquires where there is concern over how to respond to HMRC. This is particularly the case when HMRC are assessing the penalties to apply and questioning the due diligence undertaken by the client prior to claim submission. Increasing threats of claims on Professional Indemnity insurance, and damage to client relationships are a significant concern. Unfortunately, it’s a conversation I’m having on an increasingly frequent basis with accountants.
How the insurance market is responding to the increased risk of HMRC enquiry
The fee protection market is also responding quite strongly to claims being made for enquiries on R&D tax relief claims, with many pulling out of cover (or substantially increasing premiums). The reason being that if, as insurers, they don’t believe that the claim has been prepared comprehensively, accurately, and with due care and attention, they will not cover any claims made for R&D enquiries. This is leaving many accountants concerned over their exposure to risk.
What services are available to help accountants manage R&D tax relief for their clients?
Supporting accountants who have clients in enquiry is a service we can assist with, but by that stage, both accountant and client might feel like it’s too late. You are already committing time and resource to deal with the situation. Is it now time to reconsider working with a compliance-led partner for your overall R&D provision? There is an increasing appetite for pre-enquiry desk-top compliance checks on larger R&D tax credit claims, to assess for risk. This, alongside a general move towards partnering with a third-party provider, is giving many accountants peace of mind both over their risk profile and ongoing provision. It’s a move that allows them to support their clients fully, and with confidence in the R&D tax credit claims being filed. Accountants can also be safe in the knowledge that should a compliance enquiry be opened, it will be dealt with promptly, efficiently, and appropriately.