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HMRC lose in “Careless Inaccuracy” in R&D tax claim case

Last month a first tier tribunal (FTT) found against HMRC in a case where they accused a scaffolding firm of being careless in submitting their R&D claim.

In this article we take a brief look at the case and the implications.

 

What is the background?

The case involves H&H Contract Scaffolding Ltd (H&H), who in February 2021 submitted a claim for R&D tax relief.

In May 2021, HMRC opened a check into the claim and requested various information and explanations. H&H’s appointed agent “Legal Rooms” provided an ‘R&D Compliance Report’ soon after.

HMRC and the agent exchanged various correspondence regarding the contents of the Report and how the R&D claim came to be made.

Ultimately however, HMRC rejected the R&D claim and issued a penalty assessment in September 2022 in the sum of £6,631.01 for “carelessness inaccuracy”.

 

How did H&H react?

Mr Thomas, the director of H&H argued that he understood the agent he used to make the claim was a reputable company who he had met on several occasions at NASC (National Access & Scaffolding Confederation) events, which is the professional body for scaffolders.

Also, he had spoken to other NASC members who had reassured him that he was instructing a reputable R&D agent with specialist experience in R&D for scaffolders.

He had given the agent full and accurate facts, checked the advice he was given as far as it was possible for him to do so and so had not been careless.

H&H appealed the penalty assessment.

 

What was the outcome?

The case was decided on papers rather than at a hearing and if you would like to read the full details of the appeal, you can click on this link. The FTT ultimately dismissed HMRC’s argument that the taxpayer had been careless.

HMRC failed to set out a suitable argument based on the facts, as to why H&H had been careless and somewhat diplomatically, the judge suggested that the case brought by HMRC was ‘careless’.

 

What are the implications?

Whilst H&H have been successful in this instance, it does still indicate HMRC’s continued push against inaccurate claims and their raising of penalties in situations where penalties are not appropriate given the actions taken by taxpayers.

Now more than ever it’s essential that when submitting a claim for R&D tax relief, that appropriate advice is taken from reputable professionals and likewise if your businesses is facing an enquiry into R&D claims.

Get in touch with our R&D tax specialists if you need support or help.

Disclaimer

The information was correct at time of publishing but may now be out of date.

R&D Tax Relief
Posted by Cowgills
20th March, 2024
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