Over the last few days I have heard two (independent) stories about approaches being made by a supposedly reputable R&D company in the NW.
The first was a cold call telling an insurance company that they could expect £25k by making a claim. This was without any discussion or assessment about the company’s activity, just a blanket promise that the claim would go through.
The second was to a business coach who was promised £12k because they had to undertake “research” for the service they provided to their clients – stating that they had made similar claims in the past that had been approved.
NEITHER of these companies are involved in any work that would qualify under the scheme and this R&D firm has omitted some really important facts when talking to these businesses.
1. To qualify for relief a business must be attempting to make an advance using science or technology. “Research” must be related to the resolution of a technological issue, so developing concepts, ideas or writing a book does not qualify.
2. An R&D claim is never “approved” by HMRC. Even after a claim is processed, HMRC can launch an investigation, impose fines or demand full repayment at any point over the next seven years.
3. Just because one of your competitors has made a claim it is no indication that you are eligible for relief yourself. You must be able to establish that you have made a technological advance and be able to justify your claim in the event of an HMRC enquiry.
It was by chance that I know the people that run these businesses and it was lucky that they could call me to clarify the position. If they had gone ahead the likelihood is that they would have been forced to repay any benefit received, which would have had profound consequences for both companies.
Everyone wants to get the most out of making an R&D claim but ask yourself a few questions before you are lured by the promise of a big pay-out:
- Are you talking to a specialist or a sales person?
- Have they explained the rules to you and do you understand what qualifies under the scheme?
- Has a consultant scoped your R&D work and are you confident they have identified legitimate qualifying activity?
- Will the consultant help you prepare the correct supporting documentation including a detailed technical narrative?
- If, at some point in the future, HMRC want to launch an enquiry into your claim, will the R&D consultancy firm be there to support you and help you defend it?
I am confident that the vast majority of R&D firms are diligent and adhere to the rules but if there is any doubt in your mind you should double-check with an expert.
As always, if it sounds too good to be true, it probably is!