It isn’t their desire to raise standards that people take issue with. On the contrary, most working in the industry would welcome higher standards. But, in practice, many have found their approach more difficult to adapt to than it seems like it should have been.

Notably, the Chartered Institute of Taxation recently sent a letter to HMRC detailing their observations about how the scheme has been policed. They raise some excellent points in the letter, especially about how enquiries have been issued and handled by HMRC’s ISBC compliance teams.

The feedback and conversations that we’ve had with our members throughout this period echo the sentiments expressed by CIOT, and The R&D Community is similarly eager to see the scheme function more effectively for everyone involved. For us, there’s one clear point that needs to be addressed to help HMRC police the R&D scheme in a more reasonable, pragmatic, and consistent way.

Training

We see first-hand every day how the R&D courses on our training platform help people navigate the complex guidance laid out by HMRC. Unfortunately, it doesn’t seem like HMRC’s own caseworkers have access to a similar level of training. When issuing correspondence about enquiries, their knowledge often seems inconsistent, incomplete – and sometimes just flat-out wrong.

We believe that the key to achieving the goal of higher standards lies in a clear, shared understanding of how the scheme functions. To support CIOT’s letter, we thought we’d send HMRC one of our own – with an offer on how we think we can help.

20-22 Wenlock Road
London N1 7GU
www.the-randd-community.co.uk
contact@the-randd-community.co.uk

16 January 2024

Philippa Madelin
Director, Wealthy & Mid-sized Compliance
HMRC

Dear Philippa,

R&D training-centred collaboration between HMRC and industry

We and our members have followed with interest the public correspondence1 between CIOT and HMRC, which discusses the impact of various compliance measures now being used within the R&D tax relief scheme. While we appreciate the scale of the problem and the need to bring it under control as swiftly as possible, both we and our members generally agree with CIOT that some aspects of HMRC’s current approach to compliance are causing significant collateral damage to genuine claimants.

While CIOT’s latest letter outlined a range of concerns (which we need not reiterate), we were especially interested in their observations on the training of HMRC’s caseworkers, particularly within the ISBC teams. For convenience, we have provided a brief summary of these below. We then provide two simple, practical ideas on how HMRC and (at least some of) the R&D advisory industry could come together around new, shared training content and systems. These would not only augment HMRC’s existing resources2 but also lead to more consensus between HMRC and R&D advisors about what good practice entails and what “eligibility” looks like in the field. Our hope is that this results in more compliant claims, swifter processing, and more harmonious relationships between HMRC, R&D advisors, and their clients.

A brief summary of CIOT’s comments relating to HMRC’s training

The following excerpts from CIOT’s letter of 11 December 2023 suggest that training-related issues may lie behind some of the problems experienced by R&D advisors and their clients.

  • “…the fundamental issue is that the volume compliance approach does not work well for R&D tax relief claims. This is to a large extent due to the scale of the approach, which results in the use of undertrained caseworkers; and the complex nature of the relief, which requires technical consideration to ascertain whether or not there has been qualifying R&D.”
  • “A better approach would be for HMRC to reduce the volume compliance approach until caseworkers are properly trained, with an appropriate understanding of R&D.”
  • “….caseworkers need training and confidence to more frequently recognise that some cases are poorly selected for the volume compliance process or the issues are more nuanced and warrant a more specialist and detailed enquiry.”
  • “…the problems with the volume compliance approach arise to a large extent because the caseworkers do not have sufficient training in relation to R&D tax relief.”
  • “Unfortunately, as this escalation process leaves the decision with the caseworker, it relies on the caseworker being able to recognise that the claim is one where assistance is required. We are not confident that this is happening appropriately, especially given our concerns around the current level of training, and the limited knowledge and expertise of caseworkers about what R&D is.”

While we agree with the statements above, we also fully appreciate the challenges that HMRCis likely to face in training large numbers of people to a consistent level of knowledge and
competence. Even with the significant resources available to large organisations, this is rarely an easy task – particularly within such a specialised area. With the prevalence of remote working, the complexity of the schemes, and the subjectivity inherent in the definition of R&D itself, we are not surprised that training is emerging as a critical factor in whether HMRC’s caseworkers are correctly assessing the validity of R&D claims.

In the next section, we propose two simple ways that new or existing training could be used toaddress these issues, while also creating significant spill-over benefits that would improve the level of compliance within claims submitted to HMRC.

Practical proposals for a training-centred collaboration between HMRC and the R&D industry

We presume that HMRC has extensive training programmes in place for staff involved in assessing R&D claims. However, judging by the experiences of our members and the comments from CIOT, there do seem to be training needs within at least some teams or departments that are not yet being completely met. We would therefore be interested to explore whether even more effective results could be achieved by augmenting HMRC’s existing training with different types of content. This could give caseworkers more insight into how R&D advisors endeavour to apply the Guidelines in practice, and the challenges faced by companies when attempting to prepare compliant claims with the resources reasonably available to them.

There are at least two approaches that we would be interested to discuss further with HMRC.

In the first, we (The R&D Community) could give HMRC’s caseworkers preferential access to the bank of video-based training courses that we have specifically developed for the needs of accountants and R&D advisors. These courses are pre-recorded and hosted on a software platform, which means that they can be delivered to large numbers of people in a very consistent, convenient and cost-effective way. The content is practical and would give caseworkers a different perspective – helping them to understand more about how good R&D advisors seek to apply the Guidelines in an ethical and reasonable way. This could allow HMRC’s caseworkers to more easily differentiate between advisors who make appropriate use of the R&D tax relief scheme and those who set out to abuse it.

In the second approach, we could work with HMRC – again, on preferential terms – to develop supplementary R&D-related training courses to your specific requirements. This could capture practical insight and examples from across HMRC’s experienced R&D staff, so that caseworkers benefit in a controlled, consistent and systematic way from the valuable ‘soft knowledge’ that has built up within the organisation over time. These courses would augment your existing training, rather than replace it, and also allow advisors to better understand HMRC’s perspectives and priorities.

On this latter point, we propose that the resulting courses are hosted on our training platform and accessible to our members. The great strength of this is that HMRC and our growing membership of R&D advisors would all be using the same training materials and resources. Giving all learners access to the same information should result in more common ground and a
deeper understanding between advisors and HMRC about what is acceptable and ethical practice when applying the generic Guidelines to real projects.

While these ideas are easy to suggest, the second at least will involve a huge amount of work. However, The R&D Community has been producing practical and digestible video-based training content for accountants and R&D advisors since 2021 and our small but experienced team has developed the competences and capabilities necessary to deliver this.

We would welcome further dialogue and/or feedback on our suggestions, which are proposed in the spirit of improving standards of knowledge, competence and ethics within an R&D consultancy market that has suffered for some time from the activities of bad actors.

Yours sincerely,

Richard Edwards
Founder, The R&D Community

We haven’t had a response yet, but we’re hopeful that there’ll be a positive outcome. The R&D tax relief scheme is a vital resource for British businesses trying to push boundaries and drive technological innovation. This seems to be the government’s view as well, as they put a lot of work into the revised, merged scheme that comes into effect for accounting periods starting on or after 1st April.

We’ll post the response on our website as soon as we’ve received it, so check back regularly if you’re curious about an update. Or, if you want to make sure that you don’t miss it, sign up to our newsletter.