Ask the Collective
The questions independent drinks founders ask most — answered. Distilled from years of community knowledge so the good stuff never disappears in the feed again.
What are HMRC's current enforcement patterns for R&D tax relief claims, and are they reviewing claims retroactively?
HMRC's approach to R&D tax relief has shifted significantly and enforcement activity is increasing, particularly for claims submitted from 2020 onwards. **Current enforcement patterns:** - Among claims submitted for 2020 and later, the majority (13 votes) have been paid without challenge, but a material minority (4 votes) have been subsequently challenged by HMRC and are currently being fought, with at least one claim already overturned (1 vote) - For pre-2020 claims, challenges are rarer (1 vote challenged out of 11 total) but members note this may reflect "yet" rather than definitive safety - HMRC's stated basis for challenges includes narrower interpretation of what qualifies as "Science & Technology" — rejecting claims where the technology, whilst genuinely uncertain, isn't deemed groundbreaking enough **Shift in advisor stance:** - Professional advisors are now warning members off new claims. One accountant's explicit guidance: "unfortunately we do not believe that the claim would satisfy the definitions of R&D for tax purposes in the current climate. If HMRC were to reject a claim for the 22/23 financial year, they have the ability to impose penalties and review previous claims. As such, we would not want to process any new R&D claims." - Members describe previous claims that "would have qualified without issue" now carrying unacceptable risk **Member sentiment:** - "The glory days are over" - Perception that HMRC is "going after small companies who they can bully into repaying" while larger firms remain unchallenged - Members are actively choosing not to submit claims due to penalty risk, even for work that previously qualified **Caveat:** This reflects community experience to date; the pattern of retroactive review of earlier years (2019 and before) is still emerging.
How should founders approach R&D tax relief claims given recent HMRC enforcement and stricter eligibility rules?
HMRC has significantly tightened R&D tax relief scrutiny in recent years and is actively auditing claims, particularly targeting smaller businesses. Members report a shift from a generous, post-claim-payment model to stricter pre-payment validation. **Key risks and changes:** - HMRC's enforcement mandate has intensified; the agency now requests detailed information and challenges claims more frequently, sometimes with generic responses that don't adequately address detailed counterarguments - Claims are essentially self-assessed (HMRC pays first, audits later), making them vulnerable to retrospective challenge - Eligibility rules have become "considerably less lenient" — what qualified in previous years may not now - Smaller businesses face disproportionate audit risk, while larger firms with dedicated R&D departments and professional advisors (PWC, KPMG, Deloitte) face less scrutiny - Claims on operational staff who are not 100% R&D-focused attract particular scrutiny **Practical recommendations:** - Work with a specialist R&D tax relief advisor; members report claims can be substantially optimised (one founder's £10k expectation was increased to £45k) at competitive rates - Be conservative with claim scope; one founder reduced anticipated claims significantly in anticipation of stricter scrutiny - Ensure robust documentation of qualifying work to withstand HMRC challenge **Caveat:** Members emphasise caution is now warranted. One founder is in active dispute with HMRC over a 2021 claim (£33k) that was challenged mid-year with limited explanation.
Has anyone experienced R&D tax relief claims being retrospectively overturned or challenged by tax authorities after initial approval?
Yes, members have experienced R&D tax relief claims being retrospectively overturned. One member reported having a claim overturned for FY 2022 (with two successful claims in prior years), resulting in having to repay £17,000. Another member confirmed a similar experience. Members who faced overturned claims noted that challenging the decision appeared to involve significant administrative burden, with at least one deciding not to pursue an appeal due to the workload involved. Members experiencing this issue are available to discuss their experiences directly.
What are the current requirements and risks around R&D tax relief claims for drinks brands?
R&D tax relief claims for FMCG drinks brands are increasingly scrutinised by HMRC and require careful consideration before submission. **Current situation:** - HMRC now requires R&D claims to be filed via an approved agent rather than directly - Government has become "much stricter" on what qualifies; members report increased investigation activity and repayment demands on previous claims - Several brands are choosing not to proceed with claims this year due to heightened risk **Qualification rules:** - **Data Fox** was used by members but is now "much more cautious" given stricter enforcement - New variants, bottle designs, and cosmetic changes do **not** qualify — claims require "proper science involved" - Members strongly advise exercising caution and understanding exactly what HMRC will accept before claiming **Caveats:** - Many FMCG brands (not just drinks) are currently under investigation for previous claims, with significant repayment demands - The landscape has shifted materially in recent months; historical claims that passed may no longer meet current criteria