There has been a great deal of change in R&D tax legislation recently, and this has brought with it lively discussions in the industry, with some R&D tax advisors becoming worried about HMRC’s more stringent scrutiny of claims and anti-fraud measures. Despite this, however, there is an opportunity for these changes to become a catalyst for positive change in the industry, increasing levels of accountability and raising the benchmark of quality for R&D tax claims.

With some advisors choosing to exit the market, opportunities are now appearing for accountants to double down and expand their services and offer more comprehensive client support. Mike Dean, Managing Director of WhisperClaims, offers his thoughts on how accountants can remain focused on providing a high-quality service for their clients, irrespective of the turbulence in the industry. 

Battling the Turbulence 

However inconvenient, it is worthwhile recognising that the increased scrutiny from HMRC is necessary to curtail the rise of spurious claims in the R&D Tax sector in recent years. While a few rogue advisors have pushed the boundaries of the scheme, failed to provide transparency, and given the market a bad name, most accountants recognise the importance of providing a genuine and compliant R&D tax service to eligible businesses.

Instead of becoming fearful of providing R&D tax services, it is now more important than ever to offer this valuable financial resource to clients who genuinely deserve access to it. Some R&D tax specialists are pulling out of the SME market as a result of a reduction in tax rates and HMRC’s increasing efforts to combat fraud, leaving some clients to turn to their accountants for support instead. This represents a potentially lucrative opportunity for accountants to embrace this new revenue stream, and offer a dedicated in-house service that incorporates R&D tax advice. 

While the escalation in HMRC activity can be disruptive and unsettling, it shouldn’t be enough to convince accountants to stop providing this service to clients. Accountants can maintain and bolster their existing relationships with clients and attract new business by continuing to offer an R&D tax service, and at the same time ensure that they are genuine clients with valid claims. 

Staying Ahead of the Competition 

Building the essential abilities is just the first step in providing a comprehensive client service that incorporates R&D tax. In order to guarantee that claims continually satisfy HMRC’s criteria, accountants must also develop a solution that is reliable, economical, and, most importantly, rigorous.

The creation and implementation of reliable systems for client screening and risk-assessing claims, as well as building a solid understanding of HMRC’s shifting guidelines, are important components of this. Accountants can prove their dedication to providing a comprehensive range of advisory services by quickly and accurately determining a client’s eligibility. In addition, they may identify hot clients to pursue and prevent potential disappointment with work that is unlikely to qualify for tax relief. 

The introduction of the new Additional Information form, alongside HMRC’s other recent changes to the scheme, has added further complexity to the tax claims process, and increased delivery costs. Transitioning to a more structured, software-based process mitigates the risk of errors, streamlines the claims process and creates a scalable model that can meet increasing client demand. Automating the claims process also eliminates the most time-consuming parts of the process, freeing up accountants to work more efficiently with clients to fully comprehend the breadth and importance of any R&D activity. 

Supporting Your Claims 

However, it is not imperative for accountants to develop these tools internally. In order to prepare and validate claims, using an end-to-end R&D tax software solution supported by expert services helps accountants keep pace with the newest criteria. It also provides a structure for evaluating the validity of claims and working with clients to collect all necessary data. Such a service should also offer access to peer communities that can foster understanding and confidence as well as an expert-led advice line that offers additional support. Even experienced R&D tax service providers can benefit from this support, ensuring that claims remain compliant within an ever-changing HMRC environment and helping reduce the risk of nudge letters and enquiries. 

If HMRC does open an enquiry, an end-to-end R&D tax software solution with an “Enquiry Support Service” could offer an additional layer of support. Such a solution would guarantee the accountant knows how to best reply to HMRC in addition to building the confidence to dispute a claim and minimising the time-consuming element of the full enquiry process.

Conclusion

Although HMRC’s stricter approach to R&D tax relief is likely to persist, it is expected that the current level of HMRC action will decrease over the next six months and return to a more stable level. There won’t be as many nudge letters or claims being contested. This will be due in part to the worst offenders backing away and the most dubious allegations being handled. However, the adoption by accountants of reliable, repeatable procedures based on software and strong support would also raise the calibre of the claims being submitted, lowering the likelihood that HMRC may raise a dispute. 

Ultimately, R&D tax relief is still an important part of the overall R&D tax service. Given the current economic context, it still represents a sizable tax benefit for clients. Innovative businesses that are engaging in legal R&D ought to have access to the programme and benefit from it. 

The changes shouldn’t be a barrier for accountants; in fact, the opposite should be true. It is a good thing that the R&D tax industry has rid itself of the bad apples. It lowers the possibility that clients may receive poor advice and creates space for the launch or expansion of a full-service portfolio that satisfies client needs and boosts client engagement. The key is to build understanding, confidence and a robust claims process model that allows the delivery of R&D tax claims in a repeatable, consistent and cost-effective manner.