Lessons for energy industry in landmark R&D tax relief case

Posted on 04 August 2022

R&D tax relief can act as a lifeline for innovative businesses in the energy supply chain. However, with HM Revenue and Custom’s (HMRC) mounting scrutiny it is important to ensure your R&D tax relief claim is as robust as possible.

The recent growth in spurious R&D claims has prompted an increase in enquiries from HMRC, leading to the risk of challenge to legitimate claims. Also, in spite of the successful ruling against HMRC in the Quinn tribunal case, HMRC has stated it will persist in challenging the eligibility of customer-led R&D projects for the SME incentive. As a result, it is important for businesses in the sector to be aware of the steps needed to protect themselves in the event of an enquiry.

Aside from the potential impact on future claims, if HMRC finds proof of an erroneous or invalid claim, significant sums may be required to resolve the situation. In some serious cases, HMRC can extend their assessment back to earlier years.

To ensure your claim stands up to scrutiny, you need to start by picking the right adviser. Many are not regulated, and with the energy industry facing exceptional challenges, examination of an advisor’s credentials is key. Secondly, the best advisory firms will have specific sector experience. If an advisor does not ‘speak energy’, they do not know your business. Thirdly, the policy-level conversation surrounding R&D tax relief is changeable. If you suspect a copy-and-paste job from an advisor, your claim may face the threat of an enquiry.

R&D tax relief helps businesses innovate. However, while the majority of claims pass through the system without facing an enquiry, engaging the wrong advisor, or failing to prepare adequately, could put your business at risk.

We recently held a webinar for NOF members on the changing landscape for R&D tax relief. If you missed it and wish to catch it on-demand, you can access the recording here.