R&D tax credit changes: will it be enough?
The integrity of the R&D tax credit industry has been under the microscope for some time, with both HMRC and Government enforcing policy changes to prevent fraudulent activity and abuse, with new legislation coming into force from April 2023. Fraudulent activity could include:
- Boundary-pushing when determining what is and what is not qualifying research and development
- Including costs that are not qualifying expenditure
The above will wrongly inflate the size of the claim and will achieve a greater return.
But will these changes go far enough? Will they have the desired effect at shining the spotlight on dubious R&D tax credit claims.
The Need for Regulation
You would be forgiven for thinking that all R&D tax credit advisors are qualified accountants or tax professionals. Unfortunately, this is just not the case. Surprisingly, unlike in the law profession, regulation is not compulsory in order to set up an R&D tax credit consultancy which has opened up the market to unqualified and unregulated companies. Regulation provides that blanket of security for businesses, especially for those that are embarking on the relief journey for the first time.
What Can a Regulated Firm Offer my Business?
Using a regulated firm provides a host of security considerations for businesses, including:
Ensuring that your advisor has the relevant qualifications needed to provide this specialist advice.
Code of Ethics laws
Ensuring that your advisor abides to the highest standards of professional conduct.
Continuous training requirements
Ensuring your advisor keeps up to date with the latest changes in the industry.
Ensuring that in the event of a dispute, your business is covered by the advisor’s professional insurance policies.
An unregulated firm will not be governed by an external body so the above will not be mandatory.
Matthew Jones, managing director at LimestoneGrey, commented:
‘The 2023 R&D tax credit changes aimed at combatting fraudulent activity will hopefully be one too many barriers for dubious agencies and businesses to jump over and will prevent some claims being submitted. However, I do feel that more will be needed to halt the sizeable number of incorrect claims that are being accepted daily.”
Industry regulation would definitely be a step in the right direction, providing protection for businesses and ensuring that only companies that know fully what they are doing are submitting claims. LimestoneGrey is regulated by both the ICAEW and CIOT and I believe this is what my client’s deserve.’
Further R&D tax credit reform was planned for the Autumn but with the recent Governmental changes, we will wait to see if this still goes ahead and indeed if a regulatory mandate will be included in these changes.
Who has final responsibility for a claim?
You, as company directors, have overall responsibility for the accuracy of your claim so you need to have full confidence that your advisor is producing the correct calculations and preparing an accurate report.
Matthew Jones commented further: ‘I always advise companies to get a second opinion. The majority of agencies will provide free consultations so it will only cost you your time but could provide a clear direction on how you should proceed going forward.
Choosing the correct R&D tax credit advisor for your company is extremely important. LimestoneGrey has provided some tips on the main considerations when going through your selection process. Check out our article containing all of the relevant information here: How to Ensure You Choose the Right R&D Tax Credit Adviser.
LimestoneGrey is a specialist R&D tax credit consultancy regulated by the ICAEW and CIOT and its team are chartered tax professionals, providing the highest level of experience and competence. The fact that we are regulated ensures that we follow a strict code of conduct and have the necessary insurance covers in place to provide our clients with the utmost protection.