Call for regulation
Firms ‘need protection’ as bogus R&D tax credit claims rise
Would you credit it? Tax experts are calling for greater protection
Companies need more protection from rogue R&D tax credit advisers, it has been claimed.
R&D tax credits were introduced in 2000 to encourage firms to innovate but it has led to a rise in the number of consultancies offering to help firms save money.
Many businesses are being caught out with bad advice and potentially huge penalties from HMRC which is clamping down on bogus claims.
There are now calls for regulation of the scheme amid fears it could be shut down if the rise in false claims continues to rise.
Unlike other business advisory professionals including accountants, lawyers and pensions specialists, R&D tax firms have not been subject to any form of regulation or governance.
Mark Pryce, a Glasgow-based partner with accountants and business advisers Campbell Dallas, says he is coming across more situations where “overly enthusiastic” salespeople and cold callers can over exaggerate what should be considered as true R&D.
He says some are making incorrect suggestions on what might qualify, in order to encourage potential clients to sign up to their commission-based fees.
“A rise in unmerited claims could force the Government to close down the scheme,” he says. “It is easy enough to set up as a R&D tax relief ’expert’ without much governance or compliance.
“We need to see more protection for firms to ensure they will be dealing with experienced R&D tax credits consultancy firms.”
Edinburgh-based Jumpstart is calling for a benchmark to be set to ensure all consultants operate with high standards.
Scott Henderson, its managing director, says: “There are many highly knowledgeable R&D advisers in the market providing invaluable guidance for clients and helping them recoup significant tax breaks for their investment in innovation.
“There are, however, also a number of mushroom companies operating in our sector with low professional standards. Not only do they threaten the reputation of our sector but they can also have a detrimental impact on the businesses they advise.
“Making an erroneous claim can lead to a company being subjected to a review of their tax records from the previous six years which can be extended if HMRC inspectors believe deliberately misleading transactions have been submitted. Those which breach the rules not only face having an existing claim fully retracted but also put at risk their eligibility on any future claims.
“We will continue to push for a workable form of regulation as we believe it’s in the long term interest of firms in our sector that invest in quality people and proper management systems.
“Removing rogue elements will ultimately protect companies who rely on external expertise in applying for R&D tax credits.”