Research and development incentives are a highly valuable funding source for businesses seeking innovation. However, claiming process is not straightforward. It involves many technicalities which may not be as simple as it seems.
The UK government’s comprehensive guidelines for R&D tax claims are given to ensure only eligible companies have access to R&D tax relief. HMRC is taking various steps to mitigate fraudulent R&D tax relief claims. It is essential to be very clear about eligibility and the claim guidelines to minimise the risks involved in R&D tax claims. HMRC thoroughly assess every claim, and in case of any ambiguity or lack of documents, your claim can be subjected to HMRC enquiry. Most companies hesitate to make R&D claims for the first time due to the complexities and risks involved. It is better to understand legislation related to the R&D tax claims to claim correctly. This blog will explicate all the risks associated with R&D tax claims and provide you with the solutions to avoid such risks and produce robust claims.
Risk of HMRC R&D Tax Claim Enquiry
HMRC enquiry is the most daunting part of the R&D tax claim and enquiries have been increased to tackle fraudulent claims. HMRC scrutinises every claim, and if you are claiming for the first time without a clear understanding of prerequisites and HMRC guidelines, there’s a huge possibility that your claim might have to face an enquiry. As HMRC guidelines are complicated, it is quite challenging to produce a claim without consulting R&D tax credits specialists.
Why does HMRC investigate R&D tax claims?
Any claim that is not prepared according to the guidelines given by HMRC can be subjected to an enquiry. Claims with insufficient supporting documents or incomplete explanations of the project can cause an investigation by HMRC. Another common reason for an enquiry is incorrect calculations of an R&D expenditure. To avoid enquiry, you must ensure that your claim provides all the supporting details and clearly explains what technical innovation your project sought and how you did it. Your technical narrative must be produced precisely with detailed calculations of all R&D expenditures. Consulting experienced R&D tax credits specialists while claiming for the first time can vastly reduce the risk of an enquiry. A well prepared comprehensive R&D claim will need no further investigation or clarification. So if you are sure you are claiming in the right way or if you are claiming with an R&D tax credits specialist, there’s nothing to worry about!
What happens if your R&D tax claim is subjected to an enquiry?
Enquiries are the way to determine the eligibility and accuracy of the R&D tax claim. Dealing with HMRC enquiry is not that easy; it can disrupt your daily business. HMRC might require you to correct the computations and resubmit, which can significantly delay your claim. HMRC enquiry can broadly impact your claim by causing a reduction in your claim. If HMRC is not satisfied after enquiry, it can also implement penalties for inaccuracies in the R&D claims. If you receive a compliance check letter, don’t ignore it. It is advised to check your all tax return details, calculations, and record. It is better to consult R&D tax specialists before answering HMRC. Handling an enquiry seems daunting, but with the help of experts who have experience in dealing with enquiries can resolve this issue for you very quickly.
How can you avoid these risks?
Many businesses put off R&D tax claims because of the risks involved. But these risks are easily avoidable by using the right approach to claim. You can minimise the risks by:
- Keep all the documents and provide HMRC with all the records and your claim. It will improve the accuracy and reduce the chances of an enquiry.
- Preparing a comprehensive claim and ensuring that your claim correctly represents all qualifying R&D projects.
- Ensure all the qualifying costs are correctly identified and included in your claim.
- Stick to the guidelines and prepare claims carefully with complete transparency.
How can we help you?
Our R&D tax claim experts have experience tailoring fully maximised claims with no risks. We also help businesses facing an enquiry with enquiry support services. We handle enquiries on your behalf, saving your claim from reduction or penalties. So if you are claiming for the first time or facing a question, contact us!