On rare occasions, HMRC will want to ask further questions about a research and development (R&D) tax credit claim. ForrestBrown clients have an enquiry rate of less than 2%, compared to an industry average of 7-9%. Receiving notification of an enquiry can be daunting, but when HMRC do raise one, we are there for our clients to support them towards the best outcome. Find out how our technical firepower and know-how helped a digital agency successfully defend an enquiry – saving them considerable time and stress along the way.

Clinic is an independent creative agency based in Soho, London, developing and producing consumer and B2B brand communications for brands including Tesco, Umbro, Barclays Bank, Network Rail and Sky.

They develop bold ideas for clients, designed to inspire audiences and spark actions. Often working in the digital space, they use technology in innovative ways. This helps to launch products, increase online subscribers, and portray the human side of complex businesses.

A successful R&D tax credit claim already made

Clinic had worked with ForrestBrown on their 2014 R&D tax credit claim, which was processed without a hitch. Their second claim – for the 2015 accounting period – was submitted in July 2016. This time around, HMRC had questions.

Digital director at Clinic, Guy Hatton, describes his first impression:

Initially we weren’t too worried, but we were surprised by the level of HMRC’s questioning. Acting alone, we would have felt we had no choice but to answer each question word for word. But ForrestBrown were able to manage the process effectively so that we didn’t have to spend hours preparing detailed written responses. Guy Hatton, Digital Director at Clinic

How ForrestBrown helped during the enquiry

HMRC had asked an initial round of questions which Clinic answered, working with one of our technical specialists to help understand the level of detail required. HMRC then followed up with many pages of further questions. Drawing on our experience in dealing with HMRC and knowledge of their R&D and enquiry guidance manuals, our advice was to seek a more practical approach than preparing a further written response, due to the nature of their questions.

As HMRC were not able to meet in person for some time, we agreed a telephone interview as a way forward. We helped Clinic to prepare, with our technical specialist effectively acting as a translator between the tax and technology speak.

Guy explains:

Like many organisations I suspect, we are not a black and white business. Often things don’t appear to be as cut and dry as HMRC would like. Having input from ForrestBrown helped us to explain the technological advances that were being made and link them to the guidelines for R&D tax credits. Guy Hatton, Digital Director at Clinic

A successful and speedy enquiry outcome

The telephone interview took place in December and lasted two-and-a-half hours. The next day, HMRC closed the enquiry with no adjustment being made to Clinic’s R&D tax credit claim.

ForrestBrown’s support led to a far faster and less intensive experience for Clinic – from August to December it was sorted in four months. Factoring in the time that could have been spent on written responses and waiting for meeting availability, this could potentially have doubled.

Guy sums up:

ForrestBrown were really useful to have on our side and were a pleasure to work with. For any company facing a similar situation my advice is, be clear that the original claim that you have put together is right – like ours was.

With ForrestBrown, we trusted our claim and could defend it robustly, which was key to getting the positive outcome we did. That and having an expert mediator who can explain the tax rules clearly. Guy Hatton, Digital Director at Clinic

Helping push the technological boundaries for clients

R&D tax credits have a significant positive impact on businesses that claim them. Often, they are used to hire further creative or technical experts, but Guy talks about them in different terms – more of a culture shift:

For us, R&D tax credits have enabled us to push the technological boundaries of the work we are doing for our clients. We can take risks to produce better work. Whereas perhaps before, budgets would not have stretched to cover the chance of something not coming off first time. Reflecting on this enquiry experience, I am still positive about R&D and certainly understand more about how HMRC reviews a claim. Guy Hatton, Digital Director at Clinic

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