Rules governing advice on claiming research and development tax relief should be tightened to better protect companies from the risk of falling foul of the taxman, according to a business adviser.
The call comes in the wake of the UK government’s announcement that it is boosting support for R&D with a further £2.3 billion investment in tax credits which aim to drive competitiveness by incentivising companies to invest in innovation.
Alongside the increased spending, it is putting forward extra resources to tackle tax avoidance, evasion and non-compliance, with companies now facing a much greater risk of more in-depth HMRC investigation and potentially significant penalties if they have been party to the submission of incorrect R&D tax relief claims.
Mark Pryce, a Glasgow-based partner at Campbell Dallas, said that unlike other business advisory professionals, such as accountants and lawyers, R&D tax relief consultants are not subject to any form of regulation or governance.
He said he was coming across an increasing number of cases where “overly enthusiastic salespeople and cold-callers can exaggerate what should be considered as true R&D within the spirit of the scheme”.
“Some have incorrect suggestions on what might qualify to encourage potential clients to sign up to their commission-based fee engagements,” he said.
“It is easy enough to set up as an R&D tax relief ‘expert’ without much governance or compliance. We need to see more protection being offered to companies to ensure they will be dealing with experienced R&D tax credits consultancy firms who are well equipped with technical and professional competence, as well as high ethical standards, in this complex area of tax.”
The call for greater protection for companies is also supported from within the R&D tax credit advisory sector.
Edinburgh-based Jumpstart believes a benchmark should be set to ensure all consultants operate with high standards.
Managing director Scott Henderson said: “There are many highly knowledgeable R&D advisers in the market providing invaluable guidance for clients and helping them recoup significant tax breaks for their investment in innovation.
“There are, however, also a number of mushroom companies operating in our sector with low professional standards. Not only do they threaten the reputation of our sector but they can also have a detrimental impact on the businesses they advise.”
Last year a Leeds-based supplier to the brewing industry was placed in administration following issues with HMRC over disputed R&D tax credits.