YesTax. A positively better experience with Alternative Dispute Resolution
Most companies and their professional advisers are aware that, in the last couple of years, there has been a considerable increase in HMRC’s scrutiny of R&D tax relief claims, with bona fide claims being rejected on the basis of a disputed interpretation of the relevant provisions. This in turn has caused considerable commercial anxiety for businesses who may have based their planning on what was a previously settled view of the law.
But what do you do if, having endured a long winded enquiry process with HMRC, find out that your claim has been rejected? Our advice - if you feel as though are making a legitimate claim, don’t give up!
You can appeal against a decision to reject your R&D claim and ultimately you may even wish to take the matter further and lodge a claim with the First-tier Tribunal. However, there is one (often overlooked) option which is gaining traction amongst good advisers and producing very possible results: Alternative Dispute Resolution, or ADR.
What is ADR?
ADR is a formal mediation process for tax disputes which can often help accelerate a resolution with HMRC. When a case is accepted for ADR, a mediator is appointed to manage the process and ensure engagement by both sides.
In our experience, ADR is a cost effective and efficient route to dispute resolution and is available to all tax payers and potentially to all tax disputes.
Why would somebody choose ADR?
There are all sorts of reasons why a dispute arises between a taxpayer and HMRC. Most commonly, disputes arise because the facts are misunderstood, evidence is incomplete or there is a breakdown in communication. ADR is particularly desirable and adds value to cases that have been ongoing for at least 12 months; whilst it does not guarantee resolution, in our experience ADR cases are resolved quickly and HMRC have been taking a more sensible view than via the standard enquiry route.
Common issues with HMRC responses
Of the many R&D enquiries we have assisted with, a complete misunderstanding of what constitutes qualifying R&D is the most common line of enquiry and much of our success has been down to helping clients and their advisers to providing a clear, concise account of how the company sought or is seeking to achieve an advance in a field of science or technology, through the resolution of scientific or technological uncertainty.
We help clients and their advisers “hone in” on the technical detail of the scientific or technological advancement being sought. It is so important to start by clearly outlining the baseline in technology that any advance sought was being measured against, and defining the limitations of the (pre-advance) technological baseline.
We feel that long protracted enquiries can be avoided by avoiding heavy emphasis on commercial gain or benefits. Claimant companies are still not distinguishing between “business as usual” challenges and challenges that go beyond what a company would be expected to encounter in its line of business.
It is important to clearly reference the legislation and BEIS guidance throughout the narrative as well as giving HMRC comfort that you have read and understand the guidelines. In the last two years, we have seen numerous legitimate claims being lost by taxpayers who were not able to supply the required documentary evidence. HMRC no longer have the resource to conduct meetings at clients’ premises where they could historically “see it for themselves”, enabling them to circumvent the need for demanding greater levels of documentation.
Why YesTax?
YesTax support clients and their professional advisors to determine whether ADR is a viable option. Where ADR is a realistic option, we will manage the process, providing support from initial application all the way through to finding a resolution with HMRC. We have extensive ADR experience, having been involved in these resolutions since the initial pilot stage a decade ago and with in-depth knowledge of the Litigation and Settlement Strategy.
At YesTax, we have years of experience of not only preparing R&D claims for our clients, but also in assisting accountants across the UK with HMRC enquiries relating to claims they have made themselves.
One accountant wrote to us last month following our decision to apply for ADR for one of their clients who had been struggling to get agreement for a March 2022 R&D claim.
“I haven’t said a big enough thank you for all your help with this and the right decision you made to go to ADR. You have been amazing throughout this process!”
Many legitimate claims get rejected simply because claimants and advisers are not setting out a clear and concise account of why they qualify. If a claim has been rejected which you feel may be worth a second opinion, please do not hesitate to get in contact at hello@yes.tax.
YesTax. Positively Better