Your article “Inland Revenue probes IT provider BIW”, (24 September, page 14) is, in our view, sensationalist and potentially misleading.

There is no fundamental uncertainty over BIW's future. The auditor’s uncertainty related only to our reported tax liabilities. With an order book of about £6m, BIW is the UK’s market leader and a strong, successful business. The auditor’s comments highlighted in your article are relevant only if BIW’s research and development tax credit claims were invalid – a debate that stems from uncertainties over the interpretation of the regulations during the period. As was also stated by our auditor (but not highlighted in your article), the directors are confident that our claims were made wholly in accordance with the guidelines prevailing at the time and, accordingly, have included no provision in the accounts for repayment.

It is also important to note that BIW is by no means alone in responding to Inland Revenue enquiries regarding R&D tax credits. Some tax offices appear to have a policy of routinely (and retrospectively) querying most or all of the claims received, particularly for software R&D. This view is shared by Intellect, the UK IT industry’s trade body. In October 2003, it said it was “aware of very different approaches by different tax inspectors which is causing concern in our industry. For instance some are reported as being very sceptical about software R&D claims. The Cardiff office is often mentioned in this regard”. Should such local policies extend to other tax offices, it is likely that our competitors will also be affected.

Colin Smith, chief executive, BIW