The common misconception

    As well as compiling and submitting over 600 R&D tax claims to HMRC each year, Abbey Tax also provides a dispute resolution service when claims produced by accountants are taken up for enquiry by the taxman.

    In a recent case, Abbey Tax was approached by an accountancy firm that had made an R&D tax claim for the past two years. HMRC had opened an enquiry after the client had already received a substantial tax saving in the first year, and a significant (six figure) tax credit in the second year. Abbey Tax was asked by the accountant to resolve the enquiry. 

    It soon became apparent the claims submitted to HMRC contained several hundred thousand pounds of non-qualifying expenditure. Although Abbey Tax agreed with the accountant’s assertion that qualifying R&D had taken place, it was clear the claim was grossly overstated due to the inclusion of non-qualifying expenditure.

    This left the accountant in an extremely difficult situation. The client was liable for over £200,000 of corporation tax, plus interest. HMRC also opted to penalise the company for submitting a claim which contained material errors. This added a significant sum to the £200k of tax already due.

    There is a common misconception regarding R&D tax relief and credits. Many assume that if HMRC has paid out on a claim, the case is closed and the claim is ‘accepted’. This is entirely false. Payment of a tax credit breeds false confidence and complacency. HMRC has powers to open an enquiry into a return 12 months after the statutory filing date (normally two years after the end of the accounting period). Even if a tax credit has been paid, it may be subsequently challenged.

    Accountants should therefore be asking themselves a number of pertinent questions:

    • Have I made R&D tax claims in the past which I am entirely confident about, from both a technical and expenditure perspective?
    • ‚ÄčAm I aware of the many complex rules regarding R&D tax relief, such as connected party subcontracted cost restrictions and capitalised expenditure?
    • Would I be entirely confident in defending any previously submitted claims if HMRC were to open an enquiry?
    • Would I be confident that there would be no case of negligence to answer from a client, if an enquiry resulted in a significant corporation tax demand by HMRC?
    • Am I 100% confident that all my corporate clients who are eligible to make a claim for R&D tax relief are actually making a claim?

    If the answer to any of the questions above is ‘no’, you may wish to speak to one of the specialist R&D tax advisers at Abbey Tax. We partner with over 100 UK accountancy firms to provide comprehensive R&D tax advice. Protect your clients and your practice with Abbey Tax.

    John Moxon is a Chartered Accountant and Director of R&D Tax Services at Abbey Tax. He has specialised solely in R&D tax relief since 2009 and has managed over 2,500 R&D tax claims during this time. John sits on the HMRC R&D Consultative Committee. He can be contacted at or 0114 236 4457.