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Sometimes HMRC is stuck between a rock and a hard place. Coming down hard on those who abuse the system while supporting those who are compliant sounds easy, but in practice we know that getting the balance right is challenging. We can see this in the latest developments in research and development (R&D). Very serious concerns had been raised (including in this magazine) about spurious claims being accepted by HMRC without any real challenge.
HMRC has responded to this by a significant increase in R&D compliance activity. In the view of many in the R&D community the pendulum has swung too far the other way. Some experts who have spoken to me are very frustrated with HMRC’s new approach. They are suggesting that many of the HMRC staff now working on enquiries do not understand the fundamentals of the relief and seem to ignore much of the information sent to them by agents. The CIOT recently published a strong letter (tinyurl.com/ciotranddletter) pointing out some of the problems which are being encountered by its members.
One which particularly struck me was the HMRC officer saying that the company had not taken reasonable care because it had not contacted HMRC in advance before submitting the claim. HMRC’s suggestion that the company should have contacted ‘the helpline’ seems, to say the least, questionable. There is no way that helpline staff could possibly give considered advice on whether a particular activity qualifies for R&D relief.
No doubt things will settle down but at the moment nobody seems happy with the way that things have developed. Is this a case of ‘be careful what you wish for’?
If you do one thing...
See the revised content on TCGA 1992, s 138 clearances in HMRC’s Capital Gains Manual at CG52631.
