Vague criteria, lack of knowledge on the application process, generous claims and R&D tourism forces HMRC`s hand to start sending enquiries to claimants recently, and you may not be an exception even though you think you followed the rule book.
What are the changes on R&D Tax Claim Process:
HMRC is starting to clamp down on R&D tax relief abuses. The process of claiming will be longer (between 28 to 40 days), and more complicated for subcontractors and those claiming subsidies. The impact is that the chances of facing an enquiry from HMRC are now much higher.
Some experts call it the end of honeymoon with R&D tax claims. The claim being a generous one provides up to 33 pence for every £1 of qualifying expense has been subjected to R&D claim tourism and various abuses by SMEs over the years.
Why would HMRC start Enquiries more often now?
According to BERD survey, there is £20bn gap in R&D spend from HMRC. In past HMRC has taken some precautions to avoid foreign companies R&D claim and introduced new PAYE & NIC Cap or introduce new rules for claimants to include their R&D claims on their annual CT600.
R&D tax relief is a valuable tool for businesses undertaking innovative projects. However, HMRC is taking further steps to stop the abuse of the system.
As a result of these changes, businesses should expect an enquiry from HMRC if they make a claim for R&D tax relief. HMRC is likely to focus on whether the work undertaken qualifies as R&D, and whether the costs incurred are eligible for relief.
What can I do to avoid an R&D Tax Claim Enquiry?
If you are planning to make a claim for R&D tax relief, it is important to seek professional advice to ensure that your claim is valid and that you have the necessary documentation to support it. Failure to do so could result in a costly HMRC enquiry.
To avoid an HMRC enquiry, make sure you:
- Only claim R&D tax relief on eligible expenditure
- Keep detailed records of your R&D activities
- Get expert help with your R&D tax claim
- Keep your R&D tax claim activity description very specific. This is due to reverse the vague criteria, introduced in the past.
If you're claiming R&D tax relief, make sure you're doing it correctly to avoid an HMRC enquiry. Get expert help with your R&D tax claim to ensure you're on the right side of the taxman.