We are delighted to share an exciting update – the visit of our local MP Saqib Bhatti MBE.
Last Friday 8th September, our team had the pleasure of hosting Mr. Bhatti for a discussion on the intricacies of the Research and Development (R&D) tax relief schemes and navigating HMRC, a topic close to his heart as a chartered accountant with his family accountancy practice based in Birmingham.
Our company was founded on the principle of supporting UK Plc by nurturing innovation and assisting our clients to recover some of their costs via the HMRC R&D schemes. We firmly believe that innovation requires a willingness to take risks and we want to support companies that have the courage to do so. We welcomed the opportunity to convey our passion for the scheme and its role in fostering innovation. We are thankful that he shares our perspective on the scheme’s pivotal role in promoting and supporting innovation throughout the UK.
The focus of our conversation primarily revolved around the challenges that businesses are currently facing when engaging with HMRC in relation to R&D tax relief claims. Here are some of the key points that were discussed:
Guilty Until Proven Innocent: One major concern is that many businesses are feeling they are being accused of wrongdoing by default. HMRC’s approach presumes inaccuracy of legitimate submissions rather than supporting and assisting businesses with their investments and furtherment of their R&D innovations.
Small Business Struggles: SMEs, in particular, are finding it difficult to navigate the complexities of R&D tax relief schemes. The time, expense and effort required to contest HMRC decisions can be prohibitively high, leading many businesses to reluctantly concede or withdraw their legitimate claims rather than fight for the funds they are entitled to. This results in HMRC interpreting these withdrawals as being fraudulent and recorded as such. We believe this is fundamentally skewing HMRC’s conclusions regarding the volume of claims seen as non-compliant. Smaller claims appear to be targeted by HMRC, as they appear to be ‘easy pickings’ in terms of the number of claims being overturned by the HMRC team and operating businesses need to make commercial judgments, which all too often means they are forced to concede.
Scheme Changes: The recent changes in the schemes favour large companies. They will see their benefit increase by 50%, while small businesses will see their benefit reduced, by as much as half.
HMRC’s Role: There was a consensus that HMRC has not adequately managed the R&D tax relief scheme. While they have promoted it as government support to encourage innovation, HMRC have openly admitted the service provided to R&D specialist advisors and client businesses has been extremely poor.
Discouraging Innovation: The onerous compliance checks and perceived adversarial stance of HMRC are discouraging innovation within the business community. This is counterproductive to the very purpose of the R&D tax relief schemes.
Inexperienced Caseworkers and Out of Date BEIS Guidelines: Another noteworthy issue that surfaced is the recent influx of some 300 new HMRC caseworkers who at HMRC’s own admission lack comprehensive training, prior experience with the R&D tax relief schemes, and scientific or technological knowledge. This has led to instances where caseworkers disagree with competent professionals in the field, resulting in the rejection of claims. This is further exacerbating the challenges faced by businesses seeking legitimate relief under the scheme. HMRC will not speak via telephone or Teams/Zoom and they will only appoint a technically qualified caseworker when the case is escalated to Alternative Dispute Resolution (ADR). We fail to understand how non-technical and poorly trained workers can have the power to reject claims
The welcome news is that Saqib Bhatti MBE is aligned with our mission. He has not only understood our concerns but has also agreed to engage with relevant ministers and colleagues who may be able to address these issues. This is a significant step toward fostering a more innovation-friendly environment for businesses in the UK.
As we look ahead, we remain hopeful that our discussions with Mr. Bhatti and the support of like-minded individuals will lead to positive changes in the way R&D tax relief schemes are managed and perceived. Thank you for being a part of our journey, and we look forward to keeping you updated on further developments in this important endeavour. Together, we can continue to champion innovation and progress for UK Plc.
