Court ruling demonstrates R&D pitfalls for unwary

1 Jul 2020

R&D Tax Credits

Research & Development (R&D) tax credits have received less attention through the tribunal system than other areas of the tax legislation. However, a recent First Tier Tribunal tax case (AHK recruitment Limited v The Commissioners for HMRC) makes an extremely interesting read for both claimant companies and advisers.

In a nutshell, this latest case reinforces the importance of a good, robust R&D claim methodology that clearly articulates the technological/scientific advancements and uncertainties for the wider market of a company’s R&D project(s) based on contemporaneous evidence and how the qualifying costs have been collated, along with best practice when dealing with HMRC enquiries.  

Safe to say, this case provides a list of what not to do when it comes to preparing, supporting and defending R&D tax credit claims. Whilst the expectation is that we are likely to see more and more R&D tax credit enquiries and hearings over the next few years, the silver lining of this particular case is that it reinforces the need for claimants to adopt a robust, methodical, evidence-based approach.

At Saffery, we have developed a trusted approach that is in line with tax legislation, the BIS guidelines and HMRC’s interpretation, all designed to help our clients avoid the clear and common pitfalls. Please contact your local Saffery partner or Justine Stalker if you have any R&D tax credit queries or would like to understand more about our R&D tax credit claim methodology.