Business Leaders Face Personal Risk from New R&D Tax Requirements

All companies must now list an individual responsible for their R&D Tax claims, with worrying implications for CEOs, CFOs and other business leaders.

As of 8 August 2023, all R&D Tax Relief claims must be accompanied by an additional information form (AIF). Companies that don’t submit an AIF are seeing their claims instantly rejected. In November 2023, claims missing the form accounted for 15% of all submissions, meaning of hundreds of companies experienced funding delays.  

The additional information form asks companies for a range of information about their business, finance and development work, including what advancements they were seeking and what uncertainties they encountered during their project.  Only R&D Tax consultants with scientific and technological expertise are able to help their clients answer these technical questions effectively. 

Companies must also name the individual who is ultimately responsible for the accuracy of their R&D tax claim. To quote government guidance, applicants must provide “the contact details for the main senior internal R&D contact in the company who is responsible for the R&D claim, for example, a company director”. 

For many companies, the senior internal R&D contact responsible for R&D claims is a high-ranking member of their finance team—the CFO, FD, or Head of Tax—or technical team, likely the CTO. At earlier-stage companies, R&D Tax is often overseen by the CEO or a founder.

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Senior decision-makers face personal risk

HMRC is cracking down on ineligible claims, spurred on by its astonishing belief that “half of all claims are non-compliant”. Claims suspected of containing ineligible costs and projects are increasingly likely to face a lengthy investigation called an enquiry or compliance check. Enquiries can delay a company’s funding by several months and embroil its senior financial and technical people in lengthy back-and-forths with the invigilating inspector. 

Enquiries that unearth unqualifying expenditures have been known to damage a company’s standing with the tax agency. Historically, this reputational damage was incurred at the company level – in further scrutiny and scepticism of its future submissions – rather than by any one person. The additional information form changes things by making it possible for HMRC to lay the blame for a non-compliant claim at the feet of one person: the senior R&D contact listed on the companies’ AIF. 

GrantTree believes that directors implicated in partially or wholly rejected claims could see their stock fall with tax inspectors. This reputational blemish may follow affected professionals onto new jobs, impacting the filings they prepare for future employers and following them through their career for years to come.  

Finance professionals involved in R&D Tax but not recorded as the responsible individual must also be mindful of this development. They may now have considerable sway over their boss’s reputation. Errors and carelessness are likely to be treated much more severely as a result. 

This possibility is made more alarming by HMRC’s aggressive approach to compliance, labelled an “abuse of power” by the Chartered Institute of Taxation (CIOT). In a recent letter to HMRC, the CIOT highlighted how the “vast majority” of enquiries handled by the Individuals and Small-Business Compliance (ISBC) Directorate “result in a rejection of the whole R&D tax relief claim”. This demonstrates the real possibility of personal reputational damage for companies subject to compliance checks.

How can business leaders protect their reputations?

The presence of personal reputational risk is further evidence that company leadership cannot take R&D Tax compliance for granted. To protect their own reputation and that of their company, they must ensure they are only claiming for eligible costs and projects and that everything in their submissions aligns with the various requirements introduced by the government over the last 18 months. 

To achieve this, they must work with an R&D Tax provider that combines demonstrable claim experience, a rigorous approach to compliance, and the scientific and technical knowledge needed to effectively demonstrate their projects’ eligibility for funding via the additional information form. 

With 13 years of experience submitting fully compliant claims, a team of PhD-level R&D Technical consultants, and free Enquiry Defence for all clients, GrantTree is the perfect partner for your upcoming R&D Tax submission. 

Our R&D tax experts have a zero-tolerance approach to non-qualifying costs, protecting your reputation and giving you peace of mind. Our streamlined approach is designed to save your team time without compromising the quality of your company’s submission, enabling you to focus on what matters most: growing and managing your business.