We have witnessed an alarming increase in new R&D tax advisers entering the market over the last 12-24 months. Many promise businesses that they will receive large financial returns for very low fees and with minimal input to support client R&D claims.
Those claiming to be ‘HMRC-approved agents’ should be given a wide berth as HMRC does not approve or affiliate with individual R&D tax advisers. Exaggerated claims of ‘100% success rates’ should also be treated with suspicion as no tax adviser is immune from random HMRC investigations and quotas.
Working with R&D tax advisers with minimal track records and an indifference to due diligence could not be worse timed. The government plans to include major R&D reforms to the Finance Bill 2022-23 that will amplify HMRC scrutiny for all future R&D tax credit claims. The reforms are designed to tackle the rise of boundary pushing and abuse that, uncoincidentally, correlates with the growth of unscrupulous tax advisers.
64-8 Forms and Deed/Letter of Assignment
One of the more pernicious requests these tax advisers make is asking businesses to sign agency agreements. By signing a 64-8 form, businesses authorise an agent to deal directly with and receive correspondence from HMRC on their behalf (e.g. R&D tax credits, VAT, corporation tax etc).
The 64-8 form reads:
“This authority allows us (HMRC) to exchange and disclose information about you with your agent and to deal with them on matters within the responsibility of HM Revenue and Customs (HMRC), as specified on this form.”
Advisers may also ask companies to sign a deed/letter of agreement to assign them rights and benefits over the tax refund – this is legally binding and often not made obvious in contracts.
Agency agreements are harmful in several ways:
- Authorising a non-qualified advisor to retain full responsibility over R&D tax correspondence leads to loss of control.
- Businesses lose oversight of their tax affairs.
- Having signed a deed/letter of assignment, tax refunds are paid to the tax adviser’s account (to which they are legally entitled) from which they take their fee.
- Businesses must trust advisers will transfer the balance (some even charge for transferring the funds).
- If a deed/letter of assignment is not cancelled, other tax refunds may be legally directed to the adviser’s account with limited recourse.
- Sharing bank account details potentially exposes businesses to fraud.
- Advisers will continue to receive sensitive HMRC correspondence regarding tax affairs following the R&D claim unless businesses revoke the authority.
- Accountants lose oversight of R&D tax credit claims, making financial management more difficult and opaque.
- Agency agreements bypass the scrutiny of accountants.
Keith Gordon MA (Oxon) Comments – Upper Tribunal Tax Case in Tinkler v HMRC (2018).
A recent upper tribunal decision illustrates the risks businesses could face after signing a 64-8 form with their tax advisers.
“I also wonder whether the decision taken by HMRC to argue in the Tribunals that a signed 64-8 authorises HMRC to send statutory notices to advisers without any copy being sent to the taxpayer personally could cause shockwaves amongst the Department because of the consequences of the decision.”
Choosing an R&D Tax Advisor
Choosing an R&D tax adviser
R&D tax credit advisers with a demonstrable history in the sector that do not require the signing of agency agreements should be a priority when choosing a tax partner.
It is important that you and your accountant retain full control over your finances and receive pertinent HMRC correspondence around your tax affairs.
The demand for agency agreements signifies an absence of trust and belief – either in the adviser’s own ability or your willingness to pay fees when they are due.
After the launch of new anti-avoidance measures in April 2023, the names of tax advisers/consultancies involved in preparing R&D claims must be stated. Also, the new rules demand that all R&D claims be explicitly endorsed by a senior officer in your company. Placing business and personal reputation in the hands of inexperienced tax advisers may well be an existential threat to many organisations.
Cost Care Tax Promise
- We will never ask you to sign an agency agreement to bypass the scrutiny of your accountant.
- We will never deliver a report to HMRC that we do not believe will stand up to scrutiny.
- We will continue to support you as HMRC scrutiny increases over the coming months and years.
- We still believe the R&D tax credit schemes provide a valuable source of funding to which you are entitled, so long as due diligence is applied to your claims.
How Cost Care Tax Can Help
We’ve been in the tax business for over 25 years and have claimed back over £85 million in R&D tax relief for thousands of innovative businesses. From initial assessment through to the submission of a comprehensive report, your claim will be managed by tax experts who will be honest about what qualifies and what does not.
Due diligence is ordinarily enough to avoid complicated and time-consuming enquiries, however even solid cases can attract the attention of HMRC. For this reason, enquiry support is included as standard in our fee, and we work directly with HMRC to reach a positive resolution.
With a wealth of experience gained over many years of submitting R&D tax credit reports to HMRC, we are well placed to assess the eligibility of your claim. Call us today for a no obligation exploratory conversation with one of our tax experts.