In most cases, a research and development (R&D) tax credit claim will be processed by HMRC swiftly and without any issue. However, there are a small number of claims in which HMRC will ask for more information to be provided and be subject to an enquiry.
This is understandably frustrating for business owners, as an enquiry will slow down the claims process, but, it’s important to note that there a range of reasons why HMRC may look further into a claim including:
- Lack of documentation/records to support the R&D claim
- A change in your companies circumstances (a change in Director or increased revenue, for example)
- Incorrect claim methodology used
- The claim is more than the costs allowable for tax purposes
- Errors on tax returns
- Some claims may be selected at random by HMRC
Whether a business has been claiming R&D tax credit for years or they are new to the scheme, all claims will face the same level of review by HMRC. With this in mind, it’s important to put together a robust claim which can stand up to scrutiny. An R&D Tax Credit expert will use their expertise and specialist knowledge to put together a claim that meets HMRC guidelines and maximises the amount you are able to claim.
HMRC have recently put more resources into assessing the quality of claims, so let’s look at the most common mistakes made when facing a HMRC R&D tax credit enquiry:
Assuming an enquiry means your claim won’t be successful
Although not ideal, an enquiry isn’t always bad news. The HMRC inspector may be interested in the company’s wider tax position or have spotted some inconsistencies in the claim. HMRC will also randomly select a small number of claims to check. As frustrating as this process can be, ultimately the reason for conducting enquiries is to ensure the integrity of the wider tax system.
Once a claim is resolved, it should also give your company greater clarity. HMRC are usually happy to discuss the guidance and any issues, which should help with any future claims.
Expecting the enquiry will be resolved quickly
Although R&D Tax Credit claims submitted to HMRC are usually dealt with within a certain time scale (the guideline is within 28 days), an enquiry will likely delay the process. An inspector will require extra time to understand the claim submitted and the value you have arrived at. Ultimately, the timescale will depend on the quality of the claim submitted.
Assuming a ‘Compliance Check’ isn’t an enquiry.
It’s quite common for claimants to assume a ‘compliance check’ is different from an enquiry, and therefore not treat it with the same level of seriousness. These terms do in fact mean the same thing, so it’s vital that you cooperate with HMRC in a timely manner.
The ‘Competent Professional’ is prepared
An HMRC inspector will likely want to speak to the ‘competent professionals’ who have assisted in the preparation of the claim. Understandably, this can be daunting for those workers who have had little or no interaction with HMRC previously.
An R&D Tax Credit expert will be able to offer guidance and support to the competent professional to ensure that any interactions are handled with confidence.
Underestimating HMRC’s increased emphasis quality in R&D tax credit claims
When R&D tax credits were introduced in 2000, HMRC were considered to be taking an ‘educate over enforcement’ approach to encourage take-up on the scheme. Over the years, HMRC has shifted their focus to increase the quality of claims. The scheme has had the time to become established, and so HMRC expects companies to understand and follow the guidelines.
An HMRC enquiry can add another layer of stress and worry to running a business so we would always suggest enlisting the help of a specialist who is able to carefully prepare a claim for you.
Whether your business needs help submitting a robust claim or you are dealing with an existing enquiry from HMRC, we are happy to discuss how we can help you secure the best outcome.
Please call us on 161 359 4227 or email: firstname.lastname@example.org