The added cost of R&D tax claim work
Published: Wednesday, 13 December 2023
HMRC are taking an increased interest in R&D tax relief claims
Professional Indemnity Insurers view R&D tax work as high risk
Professional Indemnity Insurers view R&D tax work as high risk
PI Insurers are wary of non-specialists making R&D tax claims and there are many reasons for this:
- The rules of making an R&D tax relief claim are complex and frequently changing.
- The nature of the claim being made can be quite technical, and fully understanding it can be difficult with insufficient expertise.
- HMRC are increasingly querying R&D claims as there is thought to be fraudulent abuse of the scheme, as well as businesses claiming under the wrong scheme, incorrectly claiming for certain costs and making a claim for projects that do not contribute towards scientific or technological advancement but are instead for commercial advancement. Indeed, up to 45% of claims are thought to be incorrect (source: AccountingWeb).
With more businesses receiving enquiry letters from the HMRC, insurers are anticipating that claims will be made against accountants who have made and/or advised on R&D tax relief claims on behalf of their clients. I've added a link here to a recent article in Accounting Web covering these letters and the action you should take now, to avoid a slip up triggering an HMRC compliance visit.
What will be the effect on my Professional Indemnity Insurance of taking on R&D work?
For accountants completing R&D tax relief claims for clients, I would expect your professional indemnity insurers to ask more questions and most likely increase your premium. Underwriters will want to see that this work is incidental, and that the accountant advising on it has the expertise to carry out this type of work.
Insurers will also want to see that the client is billed for work performed rather than on a contingency basis as they think firms may otherwise be exploiting loopholes and applying a very liberal interpretation to HMRC rules, therefore leaving them exposed to an HMRC enquiry and potential professional indemnity claim.
Further reading
This Autumn 2023 budget update from ForrestBrown, R&D tax specialists, perfectly illustrates the pace of change and challenges facing innovative businesses and their advisors in keeping up with reforms.
Rosie Ali
Account Executive, Ntegrity
rosie.ali@ntegrity.co.uk
