About a month ago, I joined a roundtable organised by the wonderful team at Barclays with politicians to discuss the business environment in Scotland because of course, politicians would know best…

What I didn’t expect was to hear from so many businesses in the exact same position I was with Hypervine’s HMRC R&D tax credits. I didn’t do too much schmoozing, but I spoke with five different companies, all facing the same issues and by all accounts, these were people with valid claims.

The amount of time and effort required just to prove the work you’ve done qualifies for R&D tax credits is significant – this after already proving it in the documentation. Some companies I know even decided it was easier to pay the money back which completely defeats the purpose of the scheme. That’s why we’re still in the middle of investigating it with HMRC.

Even though we kept very detailed records, the process has now dragged on for almost two years. I believe HMRC are using their Connect AI system (with human input), and my concern is that AI could be flagging accounts and triggering investigations into perfectly legitimate claims.

I’ve also started to think that if you want to apply for R&D tax credits in the future, you might actually be better off doing it yourself rather than paying a third party to simply reword what you’ve already written. Or am I missing something?

The bigger issue is that HMRC are making tax credits and benefits harder to access, while simultaneously raising taxes on businesses. That’s not creating an environment for growth.

R&D tax credits were designed to encourage innovation, yet they’re having the opposite effect because HMRC are investigating so many claims. For years, we avoided applying for R&D credits because HMRC has a reputation for retroactively changing its mind and asking for repayment. But we eventually thought, we’ve done so much genuine R&D, surely it’s worth claiming. And then they started retroactively asked for repayment…

Was it worth it? Hard to say. I’m happy to report that the information we’ve submitted does seem to satisfy HMRC on their latest round of questions so we are making progress. It looks like we did everything correctly. But it’s taken far too long and is too late, more on that later…