FINANCE
BY ADAM LACCHIN , DIRECTOR , AZETS MAIDSTONE
Rogue R & D claim repayments could cost SMEs millions
BUSINESSES USING R & D TAX RELIEF SCHEMES AS A WAY TO BOOST CASH DURING THE COVID-19 RECOVERY SHOULD BE WARY ; REPAYMENTS OF ROGUE R & D CLAIMS ARE LIKELY TO COST SMES MILLIONS OF POUNDS .
In its latest annual report for 2020-21 , HMRC reported an implied monetary value of £ 303 million due to R & D error and fraud within the SME Scheme – up from £ 271 million in the previous year .
This is in part down to a small group of ‘ rogue ’ boutique advisors who inappropriately seek to maximise R & D tax credit claims and actively target SMEs hit hardest by the pandemic .
Businesses should continue to keep investing in R & D but take the appropriate steps to ensure they do not inadvertently or otherwise claim fraudulently , with HMRC widely expected to tighten controls to better combat rogue advisors and fraudulent claims .
The government has set itself an ambitious target to raise total investment in R & D to 2.4 % of UK GDP by 2027 – but it must do more to protect SMEs from a minority of rogue firms who seek to maximise claims inappropriately in order to increase their fee which is calculated as a percentage of that claim .
This is driven by non-prescriptive R & D rules which are open to interpretation and inappropriate claims by rogue firms targeting cash-strapped businesses . Ultimately , it ’ s the businesses that will suffer when the government inevitably acts to reduce the growing cost of R & D error and fraud , particularly with new incentives for R & D investment increasing their vulnerability to rogue advisors .
In September , HMRC reported a significant increase in the total number of R & D claims , revealing a 16 % increase in the year ending March 2020 . This equates to £ 7.4bn in total support claimed , up 19 % from the previous year (£ 6.3bn ), with further increases from 2023 following the expansion of the R & D tax relief scheme to include cloud computing and data costs , announced during the Autumn Budget 2021 .
Businesses should consider the following steps to ensure they take appropriate advice and take advantage of R & D tax relief schemes in a way that is both safe and legal .
• Be proactive in researching and understanding government guidance on new and existing allowable R & D expenses against your company ’ s activities or planned activities .
• Review these activities to assess whether you are eligible for R & D tax relief claims – or whether you can invest in R & D in order to stimulate growth .
• Beware of unsolicited approaches from boutique firms specialising in R & D tax claims and ensure you complete rigorous due diligence before taking advice .
• Seek advice from your own accountant and reputable firms with memberships to professional bodies , with reliable references from peers .
Get the right advice and start your claim
The widening of allowable expenditure in IT will considerably help the SME sector in which businesses use cloud-based solutions to enable their IT infrastructure and echoes the modern way of working . However , make no mistake the emphasis is on businesses to make sure they are taking the right advice and making legitimate R & D tax relief claims .
At Azets , our specialist R & D tax team are on hand to offer R & D tax relief advice and have a wealth of experience in making R & D claims in a wide range of industries and sectors . Speak to a member of our team . We ’ ll help you to unlock those all-important incentives and cash injections .
Local offices : Ashford : 01233 629 255 / Canterbury : 01227 454 861 Maidstone : 01622 690 666 / Orpington : 01689 827 505 Sandwich : 01304 249 997
Accounting | Tax | Audit | Advisory | Technology www . azets . co . uk
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