The Covid-19 pandemic has put huge pressure on British businesses. Whether that’s working all hours to make figures stack up, covering for colleagues on furlough, or managing childcare alongside work. Many businesses have relied heavily on advice from their accountant during this period, with the accountancy profession navigating an unprecedented number of new measures to provide accurate advice to their clients.
When we’re being pulled in a million directions, it’s tempting to cut corners or to let standards slip. That could include not doing as much due diligence as one might normally do when it comes to helping a client choose an R&D tax adviser or any other external partner for that matter.
But it’s precisely times like these, where the line between staying afloat and going bust is narrowed, that we must not let our guards down. Especially when it comes to dealing with the R&D tax credit sector which is, like the wider tax industry, only partially regulated.
This leaves the industry open to anyone who wants to try their luck. And, as usual, it’s often the accountant who will pick up the pieces for their clients if things go south. But, hopefully, things are starting to change.
Just five days before lockdown, HMRC announced that it would be calling for evidence as part of its consultation into raising standards in the tax advice market. As someone who works as an R&D tax credit specialist, I welcome this step. Accountants often tell me that there are too many spurious R&D tax advisers out there, promising payouts based on shaky information and putting businesses at risk by submitting erroneous claims.
In short, while good consultancies exist, there are many cowboys, too. COVID—19 has not changed this fact. It’s high time that we get a grip on standards in the R&D tax credit advisory space. This new consultation could not be more well-timed. All too often, companies are being subjected to poor or fraudulent tax advice. The answer is to create robust professional standards and as an industry, we need to come together to properly hold individuals and companies accountable for their actions.
One clear way to separate the wheat from the chaff is to look for membership of a relevant professional body, such as the Chartered Institute of Taxation (CIOT), which means they will be signed up to the appropriate professional guidelines. If an adviser is not bound to these, you need to ask why.
CIOT membership means that an adviser is subject to the Professional Conduct in Relation to Taxation (PCRT) guidelines. These guidelines are built around the five fundamental principles – integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Most accountants will be very aware of the PCRT guidelines, but we don’t see them holding R&D tax advisers to the same standards of behaviour.
That’s why we have been working with the CIOT to develop guidance on how the PCRT applies to R&D tax advisers, to stop those just out for a fast buck. This guidance has now been published on the CIOT website and we hope that it will be endorsed by HMRC as the standard they expect.
Other warning signs include R&D tax credit advisers with no or very limited tax expertise (trust me, it does happen). Also, look out for unreasonable contracts or spurious marketing; companies not sharing documentation with clients or making errors in submissions, and firms not defending their work. The list goes on and on, but these practices are contrary to the PCRT guidelines, so occur either because the PCRT is not being enforced or because the firms are not subject to PCRT oversight.
There’s so much happening in the R&D tax credit space right now. Last April, HMRC introduced new rules to combat substandard claims and it recently uncovered a high-profile instance of fraud, said to be worth as much as £300m to the public purse.
In response, HMRC has restructured its R&D team to focus more resources on compliance. Consequently, more companies than ever have approached ForrestBrown for help with enquiries in recent months on claims made either by themselves or, more commonly, other providers.
But we can’t – and shouldn’t – expect change to come from above. As an industry, the time has come for us to stand up for those consultants who work hard to make a difference and to one day ensure we can all be proud of the work we do as a sector as we seek to uphold high standards of professionalism.
Jenny Tragner, a member of HMRC’s R&D consultative committee and director at R&D tax credit specialist ForrestBrown