Reply to: R&D

[Wanderer]

The client's tax affairs are between them and HMRC, it's bugger all to do with the contractor. I mean, if you pay a taxi driver/builder/plumber/cleaner/decorator in cash do you ever stop to wonder if they are going to declare that on their tax return?

I would however take the opportunity to negotiate some contract terms which represented the "true relationship" between my consultancy doing the R&D and the client...

I presume this has to be a pretty small client to start openly abusing their tax position in front of suppliers?

Because no contractor would ever openly abuse their tax posit... oh wait.

Pots and kettles, come to mind here....

[northernladuk]

I presume this has to be a pretty small client to start openly abusing their tax position in front of suppliers? Highly unprofessional and larger clients legal teams and bean counters would have blocked this even if there was a perceived gain for the client.

[TheFaQQer]

It seems a little naive on the client's side that they think that having an invoice which says "R&D" means that they are going to be able to claim tax credit back.

I'd start to worry about what else they might be thinking before I signed a contract with them.

What contingency have they got in place for if they can't claim the money back? Are they likely to go bust if they don't get the tax credit? If they don't get the tax credit, are they going to start looking at you for reimbursement of some of your invoices?

I don't think I've ever specified exactly what I did on an invoice, to be honest - current client has a standard format which just accepts PO number, project code, days / hours, rate and then the values.

[northernladuk]

Could you not just put sth like:

40 hours development at R & D dept, clientco, clienttown...

Doesn't actually say your doing R & D...

Or how about put '40 hours as directed by the client' but that would open another can of works

[stek]

Could you not just put sth like:

40 hours development at R & D dept, clientco, clienttown...

Doesn't actually say your doing R & D...

[northernladuk]

How about this. Bit messy but a couple of wins....

Have you got any hols coming up? Let's assume you have a week coming up soon....

Get your client to serve immediate notice on your current contract on the Friday before hols. Nice IR35 flag for a start.
Before you go get another contract sorted with the same deliverables but have him put a description in that the project is an R&D project for widgets.
Come back of your hols, turn up at clients and sign new contract and start again.
Invoice the client 'Work as detailed in schedule and contract'.

Because he has R&D detailed in the schedule of work then he can link your invoice to R&D and that should cover his little game. Because you agreed the schedule before the work started you arrived believing what it said. If the scope of the project has changed when you get to your desk, but the deliverables are the same it isn't your problem. You do the work detailed, on what is his problem. It wouldn't be the first time a project would change slightly or get re-organised during a contract. As long as the work you deliver is the same then no contractual issues and you started in good faith so can't be seen as aiding and abetting.

Bit of a game but couple of wins if you want to play?

[Maslins]

If you want the gig, then why put your head above the parapet like this?

You can't be held responsible for their tax returns. If you pay a builder cash in hand, is there anything illegal about it? Absolutely not. It's not your responsibility to make sure that they pay their taxes.

Agreed...but if the builder was doing repairs to your home, and you asked them to say it was for your office on the invoice so you can put it through the books, you're committing fraud. I'd suggest if they agree to put that on the invoice, knowing full well it's a lie, then they're complicit in that fraud.

Appreciate R&D isn't necessarily a black and white term. However, the OP clearly feels his work isn't R&D, hence saying it was on the invoice would be a lie.

It's not your responsibility what your client does on their tax returns (unless you're their tax adviser...) but I think you should be careful about directly assisting them with something you believe to be wrong.

[TheFaQQer]

Having read all the replies, I leaning towards getting some sort of assurance from them that they have done their due diligence and researched HMRC's rules around R&D Tax Credits. Might be worth adding something in the contract to, not sure what yet, something along the lines of me not being responsible for their tax claims (which would be the case anyway, but for the avoidance of doubt it may be worth it).

Thanks all

If you want the gig, then why put your head above the parapet like this?

You can't be held responsible for their tax returns. If you pay a builder cash in hand, is there anything illegal about it? Absolutely not. It's not your responsibility to make sure that they pay their taxes.

[kingcook]

Don't be ridiculous. It's not only nothing to do with you, but unless you're a tax advisor you're not in a position to offer any advice on the subject.

As I said, R&D is a vague term. Probably 99% of what most people would call R&D isn't covered by the R&D tax credits.

[VectraMan]

This is largely my view...though possibly not the first paragraph. If you know their intentions and believe it to be wrong, by putting "R&D" on your invoices you're arguably aiding and abetting (sp?).

Don't be ridiculous. It's not only nothing to do with you, but unless you're a tax advisor you're not in a position to offer any advice on the subject.

As I said, R&D is a vague term. Probably 99% of what most people would call R&D isn't covered by the R&D tax credits.

[kingcook]

Having read all the replies, I leaning towards getting some sort of assurance from them that they have done their due diligence and researched HMRC's rules around R&D Tax Credits. Might be worth adding something in the contract to, not sure what yet, something along the lines of me not being responsible for their tax claims (which would be the case anyway, but for the avoidance of doubt it may be worth it).

Thanks all

[Maslins]

There is nothing to stop you describing the work you are doing as research and development - you are researching something and developing it.

If the client then wants to try to claim that to get an R&D tax credit, then that's their tax affairs.

Feel free to try to explain to them that you don't think it's eligible, but if they have taken all their due diligence and want to run the risk, why should that stop your company?

It's not your responsibility to make sure that they pay the right taxes. If it were, then we wouldn't use Google or shop at Amazon.

This is largely my view...though possibly not the first paragraph. If you know their intentions and believe it to be wrong, by putting "R&D" on your invoices you're arguably aiding and abetting (sp?).

If I were you, it wouldn't stop me taking on the job, but I'd just "forget" to put R&D when it came to invoice time. I doubt they'd get anything in the contract about you writing that, and I doubt they'd try to use it as a reason not to pay you (risky game)...but I could be wrong.

[kingcook]

having now read about R&D tax credit, it seems clear that in an investigation, they would get their arse tickled.

But I'm not sure exactly how it should affect you. Can HMRC come after you for the tax?

It's the HMRC coming after me bit i'm concerned about. AEOD if the client wants to says it's R&D well then that's up to them, they can deal with HMRC as they're the ones making the claim.

[VectraMan]

"R&D" is a vague term; just because you call it R&D doesn't mean you're in any way saying that it's valid for the purposes of R&D tax credits.

Just do it. What your client does with their tax return is none of your concern.

[jmo21]

having now read about R&D tax credit, it seems clear that in an investigation, they would get their arse tickled.

But I'm not sure exactly how it should affect you. Can HMRC come after you for the tax?