Published: 16 June 2021
Not a lot of people know that we can help with Research & Development (“R&D”) tax credits. We don’t shout about it, as it is an area that worries us a little.
Over the years we have gained new clients, some of whom have used tax schemes. Whilst we always work hard to help clients legitimately minimise their tax liabilities, we have never sold a tax scheme, and never will. Some firms of accountants think differently, and either in partnership with their financial services arm, or via introduction to a third-party firm, do so.
Celebrities such as Jimmy Carr, used the K2 tax scheme. 130 Premier League stars came unstuck with the Kingsbridge scheme. At a less lofty level, Employee Benefit Trusts have been used (with or without gold bullion or platinum sponge).
Employees selling the schemes have earned huge bonuses, and professional firms introducing them to clients, have earned commissions. However, the companies creating the schemes might not be around when HMRC investigate the users of the schemes, and when tax, plus penalties, plus interest get charged retrospectively.
So, back to R&D tax credits. I am not for one moment levelling accusations at R&D tax specialists. Nor at fellow professionals who refer them to clients. I have though, heard of instances of companies who have claimed R&D tax credits that I would be uncomfortable about if they were for our clients.
An email from a client, forwarded me an email from and R&D specialist: “I’ve had the below through from a guy who drinks in our local from time to time – is there anything in this?”. Most definitely not was the answer: they are a distributor of industrial equipment. A great one in fact, but they don’t do anything remotely like R&D.
But please don’t think we are unnecessarily prudent. Visiting a prospective client and having watched their manufacturing equipment in operation - machines that wouldn’t have looked out of place in a James Bond film (I am thinking Moonraker here), I was a little shocked that their advisors had never suggested a claim. Sadly, they are out of time, for that project, but still have time for more recent expenditure. We are now helping our new client to make a claim.
We are doing so though, not on a commission basis. It is common for specialists to take a percentage, say 33%, of the tax reclaimed. There is therefore an incentive to maximise the claim. Readers may have different feelings about that. Some will see a benefit in maximising tax recovery: others will worry about the advisor’s self-interest to maximise their fee. There are though parallels with the financial services sector in which through regulation, commission-based income was transformed to fee based.
How do we work? We start with a coffee at your place. We talk about your business and we have an honest conversation. And we go from there.