HMRC are increasing their checks on R&D tax claims. Their new rather blunt approach is causing uncertainty and concern amongst both claimants and tax advisors. In some cases, it is even causing legitimate claimants to walk away from claiming the tax relief to which they are entitled. And this happening at a time when UK businesses are facing an unprecedented range of challenges on energy costs, access to talent, raw materials, logistics and much more. With an impending recession and a chronic UK productivity crisis, at Easy R&D, we believe the UK Government should be encouraging and unlocking more business innovation, not discouraging R&D investment.
In this article I will examine HMRC’s new stance on compliance and will assure you that the risks for legitimate claimants are low and can be managed. I will also look at how businesses can make better, more assured claims with a lower risk of an HMRC compliance review.
As Managing Director of Easy R&D, a market leader in R&D Tax Relief since 2014 with a national team of tax advisers and 1,000’s of claims delivered for our customers, I welcome HMRC’s commitment to best practice and compliance. If anything, this attempt by HMRC, to drive up standards and drive out malpractice, is long overdue.
But, it is fair to say that HMRC’s new approach is a lot more assertive in style than ever before and it is not precisely targeted. HMRC officers have conducted the new compliance checks with a broad-brush approach. HMRC’s sometime aggressive tone in its communication, threatening criminal investigations often without due cause, has worried many legitimate claimants. A number have assumed that HMRC would always have well-founded grounds for suspicion, when they open an enquiry.
In fact, the evidence suggests that HMRC are taking a fairly scattergun approach to R&D tax relief compliance checks. As a result, a number of perfectly legitimate claimants will be sucked into time consuming investigations and enquiries. This is the unfortunate and perhaps unnecessary collateral damage, resulting from HMRC’s new compliance regime.
To reassure you, because HMRC’s approach to opening enquiries is somewhat unsophisticated, it means is that receiving a request to provide information for an HMRC enquiry or investigation, while unwelcome and often worrying, does not necessarily mean that HMRC have any specific evidence that a claim is incorrect.
In the unlikely event of an HMRC review on your claim, I want to assure you that, when working with Easy R&D, you will be fully supported by our national team of tax and HMRC expert. We will stand with you and guide you throughout any HMRC review, getting the best result for you and your company.
We always recommend that your first action, should you receive an enquiry or investigation letter from HMRC, however bluntly worded the HMRC letter may be, is to get in contact with Easy R&D. We will be on hand to advise and guide you on the best way to respond, minimising the impact on your business and team.
Looking ahead, I would always be wary of any tax adviser spouting hyped-up declarations about zero-risk methods of claiming R&D tax relief or never attracting HMRC compliance checks. A no risk approach to a tax claim does not exist, and any tax adviser who suggests that they can avoid all risk in a claim process is not reflecting reality.
I believe that a more valuable area to focus on is contemporaneous record keeping which we see as key to success, simplicity and compliance in any R&D tax relief claim.
HMRC, in their guidance to claimants and advisers, recommend what is called a ‘contemporaneous approach’ to record keeping. If you are a company making your second claim, HMRC are particularly focused on record-keeping disciplines. So whether a first time or a seasoned claimant, it’s well worth being aligned with HMRC’s requirements and advice if you want to optimise your claim and avoid undue scrutiny.
That’s why, after months of building and user testing, in the coming weeks we will be launching our next-generation cloud-based Easy R&D tax relief claims portal.
The new Easy R&D portal allows our tax and technical team to use automated and regular data entries to build up a bank of evidence for every claim that we make on your behalf. This helps us, you and HMRC to optimise, review and assess the claim, using assured data from a single source. We’re pretty excited about this new piece of software – let me explain why…
As well as being a “one stop shop” for all things related to your claim, there are a number of advanced new features in the new Easy R&D portal that will make the claims process better at every step.
Some of these features will be available at launch in 2022 and some new features will be tested and developed over time to make this tool even more useful for our Easy R&D customers, their finance teams and their accountants in 2023 and beyond.
From the launch of the portal you will benefit from:
Looking ahead we will introduce more advanced features that will allow our customers to collate even better records and evidence for their claims:
Capturing data, contemporaneously throughout a tax year avoids the pressure, risks and time of a retrospective review around the costs and management input to R&D projects. As I know from supporting many claims, a historic review of financial records, contracts and activities can be challenging and frustrating for everyone involved.
Our aim, with the new EASY R&D portal, is to reduce the stress and time involved in evidencing a claim, automating and simplifying the process
As we transition to the new portal, your Easy R&D team will guide you on the best way to code R&D costs in your accounting platform, using a straightforward coding protocol. We will also be running training sessions, so every user is up to speed. These simple steps will further simplify the way we record your eligible costs, saving your team and your accountants time and effort around the claims process.
Our aim is to give you and your staff more time to focus on your core business priorities, whilst we do the heavy lifting around your record keeping and processing your R&D tax claims.
Using the new portal, you can view the progress of your claim in real time. It also allows you to put questions to the Easy R&D team, to approve claim values and to raise an invoice for your derived benefit once a claim has been paid by HMRC.
It’s a simple and intuitive interface, putting you in control of progress-checking and approvals throughout the claim process and into the next financial cycle.
To simplify and automate record keeping we will, in future generations of the portal software, use an API, a piece of software that links different platforms so they can share data securely. The API will automatically communicate relevant R&D costs directly from our customers’ accounting software systems, into the Easy R&D portal. The API we intend to use, is designed to work with more than 23 of the most popular accounting software systems used the UK, making it simple and secure to feed data directly from your accounting software to the portal. It’s all designed to create an easier path to making an optimal and risk assured R&D tax relief claim.
The Easy R&D team pride themselves on the personal way we collaborate with every one of our customers. Despite our recent focus on automation and software, our commitment to in-person service – going the extra mile for our customers and working hand-in-hand with them – remains as important as ever. Our aim is to give our customers the ‘best of both’ – personal service and advanced data and technology solutions, in a unique Easy R&D package that makes your claims process simpler, more rewarding and lower risk.
If you have any questions relating to the new Easy R&D claims portal and how it will help your business, please do get in contact with your consultant or your customer success manager.
As always, the Easy R&D team are here for you, before during and after every claim.
Every customer and every claim we work with benefits from our deep expertise in how HMRC manages R&D tax credit applications.