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R&D tax consultants across the land had cause for celebration when it was revealed that HMRC’s efforts to tackle fraud and error had been broadly successful.
HMRC announced at the R&D Communication Forum that the way enquiries were to be carried out would undergo a notable shift, focusing on complex risks going forward.
For accountants who may have been unsettled by the changing regulations, it is worth understanding what this could mean for R&D tax relief claims going forward.
What counts as a complex risk in R&D tax relief claims?
While the news that HMRC would be shifting the focus of enquiries piqued interest, it has also caused a wave of fresh confusion.
The R&D Communication Forum did not provide a definitive definition of what complex risks would mean.
This has led to some speculation as to what the future of enquiries may look like and it is possible that the ambiguity is by design at this point.
HMRC easing the focus on smaller claims must be done carefully to avoid the onslaught of fraud and error that used to populate that part of the sector.
However, it is not as though the notion of complex risks is entirely novel.
An R&D tax consultant should already have a working knowledge of what would be considered a high-risk claim.
The most common factor associated with risk is the sector from which the R&D originates.
Niche sectors, those that do not generally produce as many valid advances, have long been subject to greater scrutiny by HMRC.
The food and beverage sector, textile sector, agriculture sector and construction sector are all considered niche and accountants working with clients in those areas would do well to seek expert advice when preparing R&D tax relief claims.
Likewise, first-time claims or those that are particularly large should expect enquiries as HMRC is likely to want to know that everything is above board.
How will the focus on complex risks change the way R&D tax relief claims are handled?
Not in the slightest, provided there was nothing wrong with those R&D tax relief claims in the first place.
As R&D tax consultants, we have focused on driving up the quality of R&D tax relief claims from everyone we work with across all sectors.
This has seen us pay close attention to HMRC guidelines, preparing clients from niche sectors for enquiries ahead of time.
Our enquiry rate is much lower than the industry average, three per cent compared to the industry average of 20 per cent, demonstrating that our R&D tax relief claims are prepared with such care that even the random enquiries seldom find us.
What needs to happen now is for R&D tax consultants to work closely with accountants and innovative businesses to ensure that the shift in enquiries does not result in valid claims being lost.
We are ready to help you understand what HMRC hope to see in an R&D tax relief claim, so that claims submitted are valid regardless of where the compliance spotlight is focused.
Speak to our team today if you want to be confidently compliant with R&D tax relief claims.
Adam Bointon is a Technical Director specialising in R&D Tax Credits for SMEs in manufacturing and software sectors. With over 15 years’ experience, he works closely with businesses to identify qualifying R&D activities and prepare clear, compliant claims. He combines technical expertise with a strong understanding of economics and finance to support successful outcomes. Adam also contributes to industry webinars and CPD sessions, sharing insights on R&D tax relief and HMRC requirements.
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