Research & Development Update for Providers - July 2024

Dear Providers,

As a matter of urgency, please read the information below, which is based on communication from the Home Care Association/Care Provider Alliance, regarding research and development (R&D) claims. This issue is occurring locally, as informed by our members, and is also being experienced across the country.

We continue to hear about care homes and homecare providers who have been approached by agents marketing schemes to use Research and Development (R&D) Tax Credits to claim Corporation Tax relief. Unfortunately, some unscrupulous companies are targeting the care sector.

Some agents are using high-pressure sales tactics and encouraging care providers to make claims for R&D tax relief, which are ineligible. This risks non-compliance with tax rules and financial penalties.

Commonly, agents cold call care providers and offer a “no win, no fee” service. They submit a claim for R&D tax relief, obtain a tax repayment from HMRC, and deduct a fee before sending the provider the balance. However, even though HMRC has paid a claim, it does not mean they have approved it. If a provider makes an ineligible claim, they may have to repay the total amount to HMRC, including the agent’s fee. HMRC can also charge interest and a financial penalty.

HMRC’s Research and Development (R&D) tax relief guidance states:

“Research and Development (R&D) tax reliefs support UK companies working on innovative projects in science and technology. Before submitting a claim you should consider if your activity will be eligible for R&D tax reliefs. It is very unlikely you will be eligible if your activity:

Will not be recognised as a scientific or technological innovation Has already been conducted or is currently being conducted elsewhere The types of claims which are rarely eligible for R&D tax reliefs include those made by:

Care homes
Childcare providers
Personal trainers
Wholesalers and retailers
Pubs
Restaurants

You cannot claim if the advance is in:

The arts
Humanities
Social sciences, including economics

You may have to pay a penalty if you make an ineligible claim.”

We encourage any members who are considering entering such schemes to read HMRC guidance carefully, take appropriate accountancy and tax advice, and carry out due diligence. They could also speak to HMRC to ensure they are not putting themselves at risk of a future tax liability or penalty.

If you’re part of an R&D tax credit scheme and are worried about HMRC compliance, again, please speak to an appropriate tax adviser.

Should you have any concerns on this matter, please inform us via email to: info@norfolkcareassociation.org.uk so that we may pass these on to the Care Provider Alliance.

There is useful information about HMRC’s efforts to publicise the risks to nursing and care homes on the website of the Chartered Institute of Taxation:

HMRC One to Many Letter – Research & Development Tax Relief: Care Homes.

Kind regards, NorCA Board of Directors

Credit: Policy, Practice and Innovation Team, Homecare Association

Sources: https://www.gov.uk/government/collections/research-and-development-rdtax-relief

https://www.tax.org.uk/hmrc-one-to-many-letter-research-development-tax-reliefcare-homes