R&D Tax Fraud Investigations for Football Clubs

Research and Development is a key function of any professional football club and, amid increasing investigations for football clubs, it has never been more important to understand how R&D is defined. To continuously improve play and pursue achievements within their league, clubs regularly invest in sports science, closely analyse performance and develop new, more advanced training techniques.

To that end, most football clubs are eligible to claim R&D tax relief.

However, as part of a huge HMRC crackdown, £90m worth of tax has been recovered following investigations into erroneous – or fraudulent – claims in the world of football over the course of the last year alone.

So – what would count as valid sports science R&D claims in football? What claims could be considered fraudulent? What happens in R&D tax fraud investigations, and what are HMRC penalties for R&D fraud?

Here, the experienced football club tax fraud solicitors at DBT & Partners explore R&D tax fraud, HMRC investigations and the options available for clubs under investigation.

What qualifies as R&D for football clubs – and what doesn’t

To avoid being investigated for R&D fraud, it’s important to understand what is required in order to receive this kind of tax break before applying.

According to Gov.uk, to qualify for R&D tax relief, any planned project must seek an advance in a specific field of science or technology.

That advance must either “have physical consequences” and/or “be an increase in overall knowledge”, and organisations must be able to clearly explain the work they are doing towards that advance.

The advance must also:

• Require work to overcome scientific or technological uncertainty
• Not be a matter that could be easily worked out by a professional in the field

For a football club, this could describe anything from developing more ecologically sustainable ways of training and playing to improving methods of injury prevention, exploring nutrition or developing new approaches to fitness or talent identification.

The best way to determine if a project is eligible for tax relief of this kind is to analyse whether or not it clearly falls under the above definitions. However, they are relatively broad – and, because of this, there are a few grey areas when it comes to sports science R&D claims in football.

Below, we’ll explore some of the red flags that may lead to a HMRC R&D fraud investigation.

Why HMRC is investigating football R&D claims (common red flags)

The recent increase in football club HMRC investigations is due to growing concerns about the eligibility of certain “R&D” projects within the world of professional sport.

One of the biggest and most common red flags arises where there is suspicion that a certain “routine” activity – such as regular training – has been “disguised” as R&D in order to achieve a tax break for the club.

Another surefire cause for scrutiny is the lack of a clear or relevant explanation regarding the specific type of work that is being done, nor the “physical consequences” or “increase in overall knowledge” that the club is hoping to achieve within the world of science or innovation.

Read more in our article on What triggers HMRC to investigate R&D Claims in Football.

How DBT & Partners defend clubs in R&D tax fraud cases

Whether you are concerned that your club is likely to be under scrutiny for a potentially erroneous tax relief claim, you have been summoned to a tax tribunal for R&D fraud in the UK, or you are aware of any other indication that your R&D tax relief is to be investigated, it is vital that you get in touch with a legal professional at your earliest convenience.

When it comes to investigations of this kind, even minor errors can prove costly. We’ll explore some of the penalties for perceived missteps of this kind below.

The specialists at DBT & Partners have more than 30 years’ of experience in supporting clients through tax investigations.

We can assist you by working discreetly to review your claims, manage correspondence with HMRC and advise you regarding your defence, settlement or disclosure strategies to prevent or minimise any reputational damage or financial loss.

Alternatively, if your case is strong, we can help you to defend your original claim.

Penalties, repayments and voluntary disclosure – protecting your club

Should a claim for an R&D tax break be determined to be inaccurate, financial penalties can extend to 100 per cent of your club’s understated tax liability. Interest may be payable on top of this amount. That is why it is vital to seek legal advice as soon as there is a suggestion that a HMRC investigation may take place.

It is worth noting that, should it be proven that your club made an honest mistake in their application for a tax break, a lesser penalty is more likely. Whatever the case, though, HMRC’s crackdown on inaccurate R&D claims makes it almost inevitable that you will be investigated, whatever the case.

In order to avoid severe penalties – and perhaps even a criminal investigation – you should seek to amend any inaccuracies in your tax claims or reporting as soon as they come to light.

You can also utilise HMRC’s Contractual Disclosure Facility (CDF) to report it. Doing so is unlikely to entirely prevent penalties against your club, but it will almost certainly mitigate some aspects and reduce the severity of those penalties.

You can make a voluntary disclosure to HMRC. You will probably then be required to pay any amount owed. HMRC may also contact you requesting further information before the matter can be resolved.

Please note, if inaccurate information is sent as part of your voluntary disclosure, your club may be subjected to further investigation and you could incur considerable penalties. For this reason, we highly recommend contacting us for assistance with your voluntary disclosure or when using the Contractual Disclosure Facility.

FAQs

Here are answers to some of the questions that the team at DBT & Partners are asked most regularly on the subject of R&D fraud.

What activities count as qualifying R&D in football?

There are a wide range of activities undertaken by football clubs that could qualify for R&D tax relief. These include research and exploration into injury prevention, grass growth and grass nutrition optimisation, the development of new talent scouting techniques, nutrition and fitness related innovations or projects seeking to improve the environmental sustainability of a club’s practices.

Projects of these kinds could qualify for an R&D tax break if they:

• Have clear aims to achieve an advance in the fields of science and innovation
• Will have “physical consequences” or represent “an increase in overall knowledge”
• “Require work to overcome scientific or technological uncertainty”
• Are not “a matter that could be easily worked out by a professional in the field”

We’ve received an HMRC compliance check letter – what should our next step be?

As soon as you learn that your organisation’s taxes are being investigated, you should instruct a specialist tax solicitor from DBT & Partners straight away. The sooner a legal expert is able to begin reviewing all relevant claims, discussing any disclosure strategies with you and supporting you throughout the process, the more positive the outcome is likely to be for you.

Can HMRC impose penalties on football clubs for R&D tax fraud?

Yes. There are currently a number of clubs under investigation for this very matter – and the resulting penalties can reach 100 per cent of the understated liability depending on the nature and severity of the case.

Should a club make a voluntary disclosure or defend its R&D claim?

This is often a difficult decision, as it depends on the strength of each specific case. The best approach is to consult your tax solicitor, as they will be able to develop a clear understanding of the nature of your original claim and the reasons behind an investigation.

When defending a claim that is under investigation, if the evidence is weak, you may risk a harsher penalty than you would receive by making a voluntary disclosure. However, if your original claim was strong and your evidence is robust, defending it may prevent any additional payment or penalty being required.

For immediate, discreet action in response to a HMRC investigation into your club, don’t hesitate to contact DBT & Partners today.