Research and development claims
In the 12 October 2023 edition, Taxation published an excellent article from Stuart Rogers (‘Where are we going?’) on the current difficulties with research and development relief compliance.
I notice that Taxation gave HMRC the opportunity to comment in advance of publication. The department’s response is, in my opinion, a classic piece of civil service waffle designed to say nothing of any real value in as many words as possible. It also invokes the spectre of mass non-compliance in an attempt to make it difficult to disagree with HMRC’s approach.
Let’s have a look at the statements in the response.
- ‘It’s important that these reliefs are easy to claim and are provided quickly to genuine claimants.’ Well, I would say to HMRC that it is failing in regard to both of these objectives. The compliance process is becoming harder to navigate and a great many genuine claims are being challenged and quickly rejected by undertrained HMRC caseworkers without any apparent attempt to actually understand the R&D undertaken.
- ‘But the levels of non-compliance that we are seeing within these schemes are clearly unacceptable.’ The problem I have with this statement is that it is (if you will forgive my directness) self-fulfilling nonsense. The ‘levels of non-compliance’ are assessed by HMRC themselves, every time they reject a claim (correctly or otherwise) it is treated as a non-compliant claim. In reality, many of those that are rejected will eventually see the claimant give up due to the excessive time and cost involved in arguing with a team of anonymous, undertrained caseworkers.
- ‘This includes better help, guidance and processes for legitimate claimants, as well as decisive action against the minority who deliberately set out to abuse the schemes.’ Well, I can say with more than a little frustration, that I have seen no evidence of any of this ‘better help, guidance and processes’ and, as for the decisive action, that sounds like targeted action (which many have been urging HMRC to take for ages) rather than the blanket challenge we are actually seeing.
- ‘We have already more than doubled the amount of people working in this area’. This is the icing on the cake of the HMRC response – it may be factually correct but it completely misses the point. The problem, as Stuart has pointed out, is that too many of the caseworkers are inadequately trained to understand the R&D legislation, yet they are being set free to handle compliance cases with what feels like minimal supervision. There is absolutely no point in throwing yet more undertrained resource into this area.
In summary, the dismissive response from HMRC perfectly demonstrates the point that Stuart’s article makes: HMRC really does not appear interested in a meaningful dialogue in an attempt to address the problems with R&D relief.
David O’Keeffe, Aiglon Consulting.
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