R&D Tax Relief – Do You Have A Claim Against Your Advisor?

Research and Development (R&D) tax relief is a government incentive introduced in 2000 to encourage companies to invest in R&D by reducing the tax burden associated with qualifying R&D activities.

The incentive aims to help businesses that innovate, whether they are creating new products and services or improving existing ones. It makes R&D more affordable and financially accessible to businesses of all sizes.

Who Can Claim R&D Tax Relief?

Contrary to many people’s beliefs R&D tax relief is not only available to labs filled with scientists or tech start-ups working on the latest Artificial Intelligence advancements. In reality, the scope is much broader. Any company in any industry that is attempting to overcome a scientific or technological uncertainty can potentially qualify for this relief.

For instance, if your business is developing a new recipe formulation in the food industry, or trying to streamline manufacturing processes in engineering, you could be eligible for R&D tax credits.

However, the complexities involved in preparing a valid R&D claim often leads businesses to rely on tax advisors or specialists to ensure the claim meets HMRC’s criteria. But what happens if an advisor is negligent in preparing your R&D claim? Advisor negligence can have serious consequences, from unexpected tax liabilities to reputational harm.

Understanding the Consequences of Incorrect R&D Tax Relief

Even if a tax advisor’s negligence results in an incorrect claim, the business itself remains legally responsible for the submission.

A business could be required to repay any wrongly claimed R&D tax relief, along with interest from the date the relief was granted. This means companies could face unexpected liabilities, which could be substantial especially for companies relying on these funds to reinvest in innovation.

For claims found to be submitted carelessly or negligently, HMRC can impose penalties that range from 15% to 30% of the overclaimed amount. For cases deemed to involve deliberate fraud or serious misrepresentation, penalties can be as high as 100% of the amount claimed incorrectly.

Directors and other responsible parties can also find themselves personally liable if HMRC find them to have knowingly approved incorrect claims or were negligent in their oversight.

What if my advisor gave me incorrect advice?

If an advisor’s negligence directly led to an incorrect R&D claim, there may be grounds for legal action. Tax advisors have a duty of care to their clients and failing to provide accurate and compliant advice could constitute professional negligence.

In order to bring a successful professional negligence claim against an advisor, a Claimant must prove the following:-

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A Professional Negligence claim must be brought within the primary limitation period to avoid being time-barred. In most cases, you must bring a claim within six years from the date of the negligence or three years from when you became aware of it.

If you believe you have a valid claim, seek advice from a legal professional to discuss your case in detail. Taking timely action is crucial to protecting your rights and recovering your losses.