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Friday, February 12, 2021
Recently, I was shocked to read an article from an ‘adviser’ counselling businesses that all manner of COVID-19 business responses qualify for R&D tax relief. The article's list of eligible projects included building bike storage and using a dedicated meeting room for social distancing purposes.
Much of this advice is nonsense and characteristic of the untrustworthy guidance businesses often receive on this subject. Always remember that you – and not your adviser – are on the hook if an R&D tax relief claim goes sour. You need to protect yourself from the risk of your adviser dropping you in it and running for the hills – and in this article we explain how.
R&D tax relief is a generous form of funding and an essential consideration for businesses in the building services sector. It’s often overlooked or underclaimed, but it is just as commonly overclaimed or got wrong. It is so much more than just a cash boost and approached in the right way, it can become a reliable source of funding for innovation.
Wild, wild west
The market for R&D tax advice is largely unregulated. Some advisers (like ForrestBrown) are members of professional bodies like the Chartered Institute of Taxation (CIOT), meaning we adhere to a strict ethical code of conduct.
But this is voluntary. Advisers can choose to remain fully unregulated and continue to provide tax advice. We recently commissioned new research in partnership with YouGov, which revealed that only 10% of companies are aware that the R&D tax advice market is unregulated.
It places a lot of onus on you, the business, to choose wisely when engaging an adviser. Unfortunately, the R&D tax consultancy market is beset with bad advice and spurious advisers hoping to make a quick buck. R&D tax relief is generous – and that’s a good thing, but there are genuinely some things that don’t count as R&D. Too often, second-rate advisers lead companies into trouble.
Unfortunately, some companies will act on the advice dished out in the article I referred to above, and others like it. A growing number of those companies will find themselves facing questions from HMRC about their claim, which they will be unprepared for. And I’ve worked with a number of businesses in the building services sector who come to me having found their adviser unable to support them when this happens.
HMRC has recently bolstered its compliance team, adding 100 new R&D staff. This means more enquiries and a greater emphasis on claim quality. If your R&D adviser is not proactively speaking to you about managing risk and how to prepare for an enquiry, then you need to question why.
One really important thing that we want you to be aware of is that there is misinformation around about R&D tax relief. Be cautious of any article or sales pitch which over-promises. The only way to really manage risk is to make sure you understand what you are claiming and, crucially, why.
Understanding R&D in your sector
An average construction project involves many stakeholders, from architects and consulting engineers to specialists trades and many others. You want to claim every penny owed to you, but it is not always simple identifying where any claim for qualifying R&D should sit within a large commercial project. It typically involves careful consideration of the relationships between these stakeholders and where risk sits.
Not addressing this before you claim can leave you exposed to detailed questioning from HMRC. Not only can this be time consuming and frustrating, if you cannot answer these questions, HMRC have substantial powers which can result in repaying relief, paying penalties or seeing previous R&D claims challenged.
However, working with an adviser that has relevant industry experience will enable you to properly identify what can be claimed, define your project clearly and then provide the reassurance needed for HMRC.
Claiming the right way
I most certainly would never wish to dissuade businesses from claiming R&D tax relief. The potential benefits to you and the wider construction sector are enormous.
But, what I want is for BESA members to have a much clearer idea of how to claim R&D tax relief effectively. If you want support with your claim, the best choice is always to enlist a reputable adviser that’s a member of a professional body (like the Chartered Institute of Taxation). This ensures that they have tax expertise and will operate professionally, competently and ethically.
Just as important is that your chosen adviser has in-house sector specialism. A high-quality claim incorporates knowledge from your field of technical expertise. ForrestBrown has a team of in-house sector specialists working closely with each of our clients.
Sector specialism lets your professionals speak to us on a peer-to-peer level. We do the difficult work of helping to accurately assess your projects and making sure your R&D activities are understandable to HMRC. But it’s not just a case of understanding your work.
Our sector specialists in construction and engineering have spent years on-site. Their understanding of how construction projects are put together isn’t theoretical. Not every adviser can promise this type of real-world insight.
A good R&D tax adviser will connect the right expertise with your team: sector experts working with your technical team and tax experts with your finance team. And there is no one-size-fits-all approach to R&D tax; the level and type of support you need will depend on your business and the projects you carry out. Look for an adviser who will work flexibly to suit you. We titled our recent research with YouGov ‘Sleepwalking towards disaster’ for good reason. Too many businesses are unknowingly on a collision course with the tax authority because they don’t have an awareness of the risks they are taking.
An exclusive BESA member offer
If you’re a BESA member who has made a claim for R&D tax relief and would like reassurance that you aren’t sleepwalking towards disaster, contact FoorestBrown for a 30-minute free risk assessment with a senior adviser.
Get in touch with BESA’s dedicated ForrestBrown contact Lauralei Chapman-Ludgate by phone on 0117 926 9022 or email at firstname.lastname@example.org to schedule your assessment.
We can help you to identify risk and offer practical advice on how to manage it.
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