Mostly these conversations are pleasant enough, as there’s a certain understanding and camaraderie that comes from having similar experiences with the R&D scheme. But sometimes, the experience can be jarring. You may have come across someone whose views on the scheme are hugely different to your own.
Obviously very few advisors are going to freely admit fraud! But some people seem almost eager to boast about their business model without acknowledging that it’s problematic.
How to report serious concerns about an R&D advisor
We’ll talk in a moment about what the indicators might be, but first, let’s talk about your next steps. If you do hear someone talking openly about flagrant abuse of the R&D tax relief scheme and public money, what can you do about it?
Well, we asked HMRC about that and they told us:
“HMRC does want to know about these concerns and will very much welcome any reports. All of these will be investigated. Anyone can report suspected fraud to HMRC calling the HMRC fraud hotline on 0800 788 877, or by using the online form at gov.uk/report-tax-fraud. Reports can be made anonymously.”
For your own safety, they recommend you don’t press for more information, or tell anyone you’re making a report.
Signs of serious problems with an R&D consultant
There is a difference between
- an R&D advisor who interprets the scheme differently than you, and
- an R&D advisor who is intentionally committing fraud.
So what kinds of signs indicate someone is in the latter group, and therefore worth reporting?
No client engagement
A huge red flag is if an advisor tells you that they base claims on a percentage of costs or revenue, without talking to the client about the project. There’s a good chance that the claim could be deemed fraudulent by HMRC. After all, it’s hard to see how a claim could be anywhere close to accurate without meaningful involvement from the client.
Whether or not the advisor writes a report to go with the claim is less clear. Malicious actors almost never include a report. But some advisors don’t submit reports with their claims for other reasons, even though this isn’t best practise.
Targeting low R&D sectors
Secondly, if an advisor’s clients are all found in very specific, low R&D sectors then that’s another cause for concern. Some advisors focus on businesses, such as care homes, stables and kennels, egg producers, pubs, cafes and restaurants, that don’t usually work to develop and improve technology.
There’s a reason why the majority of R&D advisors don’t work in those sectors, and it’s because there’s very little work that would qualify for R&D tax relief.
High volume, low value claims
Thirdly, the warning lights should flash if they’re openly talking about preparing hundreds of claims for companies in those niche sectors. Cold calling is often involved too!
Cowboy advisors like these are clogging up the R&D tax relief system, and causing delays for businesses with legitimate claims. The legislative changes coming in April 2023 will start to help HMRC weed out problem advisors, as they’ll need to be named on any submitted claim. In the meantime, you can report this kind of fraudulent activity using the details above.
What else can you do about bad behaviour in the R&D industry?
Ideally, you wouldn’t have to do anything!
Ideally, the R&D market would be well-regulated and tightly controlled, so that people couldn’t get away with large-scale fraud by submitting hundreds of claims without supporting documentation or the client’s involvement and sign-off. But unfortunately, it’s not (yet).
At The R&D Community, we are focussing on what we can do to help – and that’s developing accredited training and certification for R&D advisors. Those are things that ethical advisors tend to value, and that the cowboys definitely don’t.
If you’re of the opinion that standards in R&D tax relief should be higher and want to get involved in helping us make that happen, we’d be delighted to welcome you as a member.
By joining us, you give us a stronger voice when speaking to HMRC about the changes we’d like to see in the R&D market.
We passionately believe that there should be more specialist training and support available to advisors to help them deliver excellent and ethical R&D services, and it’s our mission to continue to make that happen.