It’s not often that I get angry, but let me tell you the situation and you tell me if you think I’m right to be miffed.
R&D Tax Credits have been brilliant for SMEs, and every SME that qualifies for the scheme should look at how much they can claim back. It can run into thousands and make a real difference to the cash flow of your business. I know this, because my business has been a beneficiary. If your business is innovative and undertakes research and development, you should make sure you are putting in a claim.
For the latest criteria and further information, check out the government website.
If your business is not eligible, however, you cannot claim. Unfortunately, I learned recently that some rogue operators had set themselves up as “FCA Regulated R&D advisors”. They were nothing of the kind. What they did was put in an unfounded claim on behalf of the client, take a hefty percentage and cross their fingers that the claim would not be investigated.
It gets worse: to find customers, these so-called advisors cold called small businesses, telling them they qualified to make a claim. While we all know not to sign anything without understanding it, we can all empathise with a small business owner being persuaded that they could get an extra few thousand pounds in exchange for a signature on the bottom of a densely-worded legal document. The business owners didn’t realise that the callers had no background in R&D, tax or technology.
It gets even worse: HMRC has a policy of “refund now, check later”. Bogus R&D claim firms were relying on the relatively small number of checks being carried out. Now, with wide-scale abuse of the system coming to light, these checks have been ramped up and more businesses are being told to pay back. And it’s not just a question of handing back what they got: there are potential fines, interest and their “advisor”’s cut too, because of course, the sharks keep hold of the commission they’ve charged. All of which leaves the business owner paying back significantly more than they received in the first place: in just one case, a business owner initially received a £4,500 tax refund – only to then receive a bill from HMRC a year later for over £7,500 following a compliance check.
These rogue operators are not small-time fraudsters: we learned that one of the UK’s largest R&D Tax Credit firms has been accused of submitting unfounded R&D claims to HMRC.
If you have received R&D Tax Credits, what can you do?
- Make sure you understand why you made a claim in the first place. Check the application: are you genuinely carrying out research and development? If you have received help to put in the claim, go back to your advisor, who may be able to put your mind at rest with a conversation about it.
- If you suspect that your claim will not stand up to scrutiny, you will need to find the money to pay back your claim. Whether you approach HMRC or wait for the knock at the door is a matter for your conscience. I would say it’s better to be up front and honest, especially if repayment could harm your business.
- If you have been wrongly advised, report the company which did so to the FCA. At least one of the companies involved claimed to be FCA regulated, so give them the evidence they need to act.
All of this makes me uncharacteristically angry: I’m angry because there are people out there, claiming to be part of the industry I’ve built a career in, ripping off SMEs and HMRC. And I’m angry because the R&D Tax Credit scheme has been so brilliant for so many businesses, anything that threatens the government’s investment in innovation should be something we resist. Finally, I’m angry that at a time when things are tough enough, businesses will be forced to close over this matter.
At Swoop, our R&D team actually IS FCA regulated and qualified to know the difference between a claim and a scam. If you don’t have a legitimate claim, we won’t pretend that you do. We will always do our best to help a customer get the funding they need to grow their business. Sometimes we have to say “no”. The customer doesn’t like it and I don’t like it… but when it’s the right answer, it never makes me angry.
