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

HMRC have advised us that they have recently issued a One to Many (OTM) letter to a population of small business and mid-sized business taxpayers in the Nursing and Care Home Sectors. HMRC have become concerned that companies in the Nursing and Care Home Sectors are being targeted by agents who focus on Research & Development (R&D) and are being encouraged to make claims for tax relief that HMRC believe are ineligible.  This is because HMRC’s compliance activities have found very little evidence of any qualifying R&D activity being undertaken by businesses in these sectors. Instead claims appear to be based on normal day to day activities and not projects which seek an advance in science and technology as a whole. 

The letter explains that companies are often cold called by R&D agents and offered “no win no fee” services. The agent will submit a claim for R&D tax relief to obtain a tax repayment from HMRC from which they will deduct their fee before paying the company the balance. However, just because HMRC have paid a claim, it doesn’t mean they have approved it. If a claim is subsequently found to be incorrect, it is likely that the company will need pay back all of the money to HMRC, including any fee deducted by the agent. In addition, HMRC may also charge interest and a financial penalty.

The letter is asking company directors to review all R&D claims submitted on behalf of their company to make sure they are correct. The letter also provides a list of questions that the directors should ask themselves if contacted by an agent who suggests the company may qualify for R&D tax relief.

A copy of the letter is provided here: R&D Care Home Letter