R&D fraud crackdown – Who should respond to HMRC or handle your client’s R&D queries or investigation?

The introduction of the R&D tax credits scheme gave rise to a raft of dubious third party companies making dubious claims on behalf of clients through the use of hard sell tactics and promises to be able to make a claim or increase existing or potential claims.

The new Chancellor, Rachel Reeves has pledged to crack down on tax fraud and non-compliance across the board, but there is no doubt that R&D will be a significant focus of that crackdown. The language used by HMRC’s Fraud Investigation Service (FIS) makes this clear by referring to potentially “opening a criminal investigation” four times in just one paragraph of their opening letter.  But is making such a claim criminal?  Is it fraud?

Over the past 18 months, businesses and their advisers have already seen increasingly strongly worded letters from FIS landing on their desks, so there is no doubt that increased compliance enquiries will be raised around past R&D claims and there will be more to come. By denying such tax reliefs, Labour is keeping funds in the Exchequer without raising any taxes thereby keeping to one of their election promises.

But who should deal with HMRC if your clients receive such a letter?

Answer #1 – You, the accountant

After all you know the client, you may have used a third party to submit an R&D claim for the client so you are one step removed from the issue or you’ve submitted the claim so you should sort out any issues.

Risks:

You may not be a tax expert, let alone in the specific R&D arena, so you may not understand the intricacies of the case enough to formulate the right response.

You may not handle HMRC enquiries and investigations every day, so may not know how best to ‘handle’ HMRC in these circumstances.

You may not be an expert in handling matters of tax fraud with FIS, so you may not achieve the best outcome for the client.

You may not be sufficiently alert to stop the matter becoming a criminal matter rather than a civil matter.

As a result of any one of the above, you may risk your relationship and future work with the client if the outcome isn’t satisfactory to the client.

Answer #2 – The client

They know their business and what, why and how they claimed, so should be able to answer any HMRC questions in detail.

Risks:

They are totally inexperienced on how to handle a tax investigation conducted by FIS.

They may not know what HMRC is or is not entitled to and they may give the wrong answers or give away information without thinking about potential risks or liabilities.

The red mist may descend at any time having an adverse impact on the eventual outcome.

Answer #3 – The original R&D claim company

If you or the client have used a third party ‘specialist’ R&D company, then maybe they are best placed to deal with any investigation. They submitted the claim, they know all the information and should be best placed to defend it.

Risks:

Are they still there to support the business?

If the company was one of the hard sell dubious R&D claims companies they may already have closed down or if not, they may still try to wash their hands of the investigation.

They will be focused on defending themselves and working for their own outcomes which is not the same as working to defend the client or getting the best outcome for the client.

They themselves are not experts in handling HMRC investigations and cases of tax fraud.

Answer #4 – An experienced tax investigation specialist like me!

I’ve dealt with thousands of taxpayers, tax investigations and HMRC throughout my long career.

Due to experience, I often can get a better outcome than either the client or the accountant can get. For example, I’ve dealt with R&D cases where HMRC letters have been received querying R&D claims and when handled in the right way with HMRC and claims are resubmitted, the claim is accepted.

I’m not here to steal your clients - I don’t do accounts or tax returns, only tax investigations.

I can position myself between FIS and the business and work with the client and their accountant to protect long standing relationships.

I’m not associated or have ever worked with any dubious R&D claims companies, so my focus is solely on getting the best outcome for the client. 

I offer a free initial consultation which can take up to two hours.  It can take that time for me to get to anything like the start of a response to HMRC. I am “good value” compared to the larger firms!

I can support your clients through every step of an investigation and be there to ease their fears, stress and worry by assisting with:

•   Responding to HMRC’s initial letters and calls.
•   Conducting meetings with FIS.
•   A second opinion.
•   Negotiating a Settlement if the claim cannot be supported.

If any of your clients are facing questions or an investigation into R&D claims, then you can give Paul Malin a call on 07979 313 010 or send an email.