R&D tax credits are a valuable incentive for innovative businesses, but recent changes in HMRC’s approach have significantly altered the landscape. Understanding these changes is vital for businesses who want to maximise their claims while ensuring compliance.

Williamson & Croft’s team of expert R&D tax consultants break down the reasons for this shift and the impact it’s having. 

Why R&D tax credit compliance matters

R&D tax credits are designed to reward companies investing in innovation. However, with HMRC intensifying its scrutiny, compliance has become more critical than ever. Ensuring your claim adheres to all regulations is no longer just best practice, it’s essential for avoiding costly disputes.

The rise in HMRC compliance checks

HMRC has dramatically increased its compliance checks, with current statistics showing that over 20% of all R&D tax credit claims are now subject to enquiry. This is a stark contrast to the previous rate of less than 1%. 

That equates to 1 in 5 claims having their eligibility checked, a significant increase.

The reasons behind this increase are primarily financial. With R&D tax credit fraud and error estimated to cost the Treasury £1.13 billion annually, HMRC has been tasked with reducing these losses. The government views this as an easy way to free up budget while ensuring that this financial incentive for innovative businesses is allocated appropriately.

What’s the knock-on effect for R&D tax credit advisors?

This shift has profound implications for R&D tax credit advisors. Many firms previously offered fully inclusive enquiry support as part of their service. However, with the surge in compliance checks, this model is becoming economically unviable for many advisors.

Some firms have withdrawn from the R&D claims market entirely, while others have had to adapt their service models. This has led to a variety of approaches to enquiry support and fee structures.

Understanding different fee structures 

As the market adapts, businesses need to be aware of the different fee structures now being employed:

  • Traditional contingency fees: Some advisors still charge a percentage of the successful claim, but may no longer include full enquiry support.
  • Fixed fee models: A set price for the entire service, though it’s crucial to understand what’s included. As we’ve discussed – this is becoming rarer due to the additional work that eligibility checks are producing for R&D tax credit consultants.
  • Hybrid approaches: Combining fixed fees and contingency, offering a balance between upfront costs and success-based payments.
  • Additional charges for enquiry support: Many firms now charge extra for handling HMRC enquiries, either through hourly rates or fixed fees for specific services.

When selecting an R&D tax credit advisor, it’s vital to understand exactly what’s included in their fee structure. Don’t hesitate to ask detailed questions about their approach to HMRC enquiries and any additional costs that may arise.

Choose an R&D tax credit advisor

Choosing the right R&D tax credit advisor has never been more important. Look for firms with a proven track record in handling HMRC enquiries, a team that includes both tax specialists and industry experts, and a transparent fee structure. Remember, the lowest price may not always represent the best value, especially if it doesn’t include comprehensive enquiry support.

Contact Williamson & Croft’s R&D tax credit specialists today

Don’t let the rising costs of compliance catch you off guard. Our team of talented R&D tax credit specialists offer transparent, comprehensive services tailored to your business needs, including full enquiry support. Contact us today for a free consultation and discover how we can help you navigate the complexities of R&D tax credits while maximising your claim value.

Speak to our team of accountants today to discuss your specific situation. Get in touch to ensure your R&D claims are in safe hands.