It is HMRC’s current brief to reduce the amount of R&D tax credits paid out on erroneous or spurious claims – meaning many of your clients may need support during investigations to confirm that their claim is compliant.
After an investigation, your client’s HMRC caseworker will make a decision based on the evidence provided – in which case the claim will be either approved, partially approved or denied.
We understand that denial of claims can be frustrating for your clients, so it is important that you are there to guide them on their options if they disagree with the outcome of an enquiry.
Making an appeal
You know that decisions from HMRC can be appealed, usually within 30 days and in writing – but it is crucial that you communicate this to your clients and support them if this is the route they take.
The first step will normally be an internal review by HMRC of the decision and the processes followed, as with any other tax-related appeal.
A decision will follow, but if the outcome of this still isn’t satisfactory for your client, the dispute might be referred to alternative dispute resolution (ADR) – including mediation, allowing your client to discuss their appeal in a supported environment, or adjudication, which will provide a temporarily binding resolution.
This gives your client and HMRC the opportunity to explain and understand one another’s point of view and reach a conclusion in a structured manner.
However, ADR is not always successful, particularly where the claim amount is significant or your client is being ordered to repay credits after they have been paid and potentially internally allocated.
A solicitor’s review
A newer option for appealing R&D tax claims that have been denied is being offered by HMRC in the form of the Solicitor’s Office, often known as SOLS, offered by Incentives & Reliefs at HMRC.
SOLS can perform an independent review of the claim and act as a ‘second opinion’ on the decision, which can either be upheld, overturned or varied.
However, do note that this service is currently quite oversubscribed, so it may be a slower process than other options for resolution.
In cases where claimants cannot agree with HMRC and everything else has been exhausted, for example, the First Tier Tribunal (FTT) can hear the dispute and make a binding decision.
The First Tier Tribunal
There have been a number of cases recently where the FTT has had to get involved after a few rounds of appeals and ADR attempts – including the case of Tills Plus, a hospitality sector operator that was ordered to repay £390,000 and had an additional £275,000 denied.
This can be a longer process than ADR or initial appeals, but it can provide useful recourse to your clients if their claim has clear eligibility.
The importance of compliance
The major thing to consider when appealing against a decision for R&D tax is evidence.
Cases almost always hinge on the strength and clarity of their evidence, and HMRC will be looking for a clear demonstration that your client’s work qualifies for credits under the scheme.
Compliance is our priority as well as yours.
Whether we’re preparing claims or assessing projects, we need to always think about how HMRC will view client work – and that means prioritising detail, transparency and good communication.
If your client plans to appeal a decision by HMRC relating to R&D tax, we can help to assess the claim and advise you and your clients on next steps – with a market-leading post-claim service of up to five years’ support after your client’s claim has been submitted.
Contact our team to find out more and discuss your requirements.
