R&D tax relief: Taking change into account

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Let’s be honest, the relationship between accountants and R&D tax advisers can be a bit strained at times.

It’s not surprising ; R&D tax relief services represent a relatively small share of total accountants’ revenues – and yet we regularly see them and their clients fall victim to bad advice from R&D tax ‘specialists’. .

With the growth of the R&D tax consultancy market, this situation has become increasingly untenable. This is why ForrestBrown is campaigning for better regulation of our market. We are passionate about tax breaks for R&D and hate to see them misused.

It seems that the government is adjusting to it too. His broad consultation and review of the R&D tax relief system is a remarkable opportunity to address the stubborn issues that frustrate (and hurt) accountants and businesses.

Why is this important?

The partially regulated tax market poses particular challenges in terms of tax relief for R&D. Many accountants find that their clients are relentlessly cold-called by unregulated R&D firms, sometimes with the promise of substantial sums of tax relief. Unfortunately, these promises are often too good to be true.

Accountants take pride in defending the interests of their clients, which includes identifying opportunities for them to access real incentives and reductions, such as tax breaks for R&D. However, fake advisers are known to paint a picture of accountants as being overly cautious in their valuations. This can cause real damage to existing customer relationships, and Since so many R&D requests are automatically processed and paid by HMRC, clients mistakenly take this as proof that the R&D advisor was right and their accountant was wrong. It is a common misconception that a paid claim is an approved claim.

Plus, it’s not uncommon for accountants to be under undue pressure to submit an amended tax return at the very last minute. This may be the first time they have heard of their client making an R&D request, and it puts them in a difficult position (especially if they have doubts about the validity of the request). We’ve heard from accountants expressing concerns about how filing the amended tax return ties into their professional liability insurance and the responsibility of handling an HMRC investigation into the claim. Many accountants are now confident enough to decline to file returns when they have concerns, but this can ultimately further strain their relationship with their client.

Market qualifications and regulations make sense

R&D tax breaks are often viewed differently from other tax areas. But it is still tax advice and it follows that the person providing it must be sufficiently qualified and experienced to do so. However, many of the new R&D providers have no tax or accounting qualifications and no experience in R&D tax advice or the tax market at large. This is often not understood by clients, who mistakenly assume that the market is regulated, which means they risk becoming sleepwalks and bad advice.

Requiring those who market and charge for tax advice and services to be professionally qualified would mean that they must adhere to the core ethical principles set forth by their professional body and follow regulatory expectations, such as the implementation of control procedures. Against Money Laundering (AML), fully explain the risks to customers and do not make misleading claims.

Support for a regulated tax advisory market is growing. One of the world’s leading professional accounting bodies, the Association of Accounting Technicians (AAT), has actively advocated for increased regulation in the marketplace, while a investigation published earlier this year showed that more than three-quarters (78%) of UK MPs are also in favor of tighter regulation.

For those who have fallen for bad advice, this decision is long overdue. Bogus advisers often describe R&D tax breaks as “risk free money”, with no mention of a possible investigation or penalty. And companies just don’t believe that such misleading marketing claims would be allowed if they were false.

It only takes a short surfing the internet to realize that there are a lot of crazy promises made out there, backed up by deceptive statistics. Many of them are completely meaningless, such as 100% success rates, or just plain bogus, such as counselors with HMRC approved methodologies. While someone within the industry would see through these claims, they sound impressive to someone outside of it.

After working in the industry for many years, it is alarming that these tactics still work, and in the current absence of regulation, this is something that reputable R&D accountants and tax advisors must work together. to raise awareness and protect businesses.

How to Protect Your Customers Now

The reality is, while the threat posed by bad advisers is clear and present, market regulation may be a way out. But there are steps accountants and advisors can take right now to help protect clients.

The first step is to take a proactive approach to informing companies about the tax R&D market. Many companies don’t know what to look for when choosing an advisor. This is something you can help.

You don’t need to explain the ins and outs of R&D tax breaks. Instead, make it clear that the R&D tax advice market is very competitive and that it is difficult to compare different proposals.

Personally, I recommend talking to your customers about the following factors (this can also be used to help them review their current supplier)

  • Are they tax advisers or chartered accountants? The starting point is always to verify the tax qualifications and experience of an advisor.
  • How often do they manage R&D tax credits? That is, are they specialists?
  • What industry experience do they have? R&D tax breaks incorporate areas of knowledge beyond taxes. An R&D tax advisor should have sector and sector expertise, not just tax expertise.
  • What will your client’s overall time investment be? Different advisers offer very different services. Some advisors themselves will invest a significant amount of time in understanding your client’s business, preparing the claim, and processing the submission. Others ask the client to analyze the costs and write the case studies themselves.
  • Is support for inquiries included in the terms of the contract? HMRC investigations are happening. Does the advisor guarantee investigation support as part of his fees? And what experience do they have with HMRC on demand?
  • What’s in the fine print? Common gremlins in terms and conditions lock customers into multi-year contracts and hidden fees.
  • How will the advisor work with you? It is vital. As your client’s advisor, you should have full access to your client’s complaint documents

Towards a better future:

The relationship between accountants and R&D tax advisers need not be biased. Finding a partner who shares the principles of your business gives both parties the opportunity to forge a healthier working relationship. The one who seeks to provide mutual clients with the best possible advice.

There is still a long way to go before the results of the consultation are clear, but there are steps we can take now to collectively ensure that we are ready for a regulated R&D tax market – and that we’re all doing the right things.

By Kelly Oakley CTA, Associate Director of R&D Tax Relief Consulting Firm ForrestBrown


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