Could you have a problem with a past claim for R&D tax reliefs?

Earlier this year, HMRC announced that they have hired an additional 100 R&D compliance officers with the intention to look at R&D tax relief claims much more closely, with more enquiries being raised and delays in making repayments.

In the past, as the government’s flagship industrial policy to encourage innovation and investment, R&D tax relief claims were rarely heavily scrutinised. However, during the last few months, the effectiveness of this relief has been questioned - click here to see our previous article on this topic.  

The main reason for all this attention is that the relief doesn’t seem to have provided value for money. R&D expenditure is estimated to be only 4 times the value of total relief provided, against the OECD average of 15 times.

So, what is going wrong? 

It could be that the relief is too wide. If that is the answer, then it is likely to lead to the relief being restricted, as we discussed in the article linked above. Alternatively, it could be that claims have been paid out which would not have been, had there been more scrutiny. The answer then is not to change the rules but for HMRC to check the claims more thoroughly.

So, does the legislation need changing or does it need policing more tightly? 

HMRC are looking much more closely at claims in order to find the answer to that question.  This is leading to a very different approach to dealing with claims and greater investigation into past claims which may already have been paid out.  The Fraud Investigation Service seems to be actively involved in this.  In a case of deliberate fraud, nobody is likely to mind that.  If, however, an assumption is being made without evidence that incorrect claims involve fraud, then that would be very worrying.  Even if fraud isn’t involved, and a claim has been made where the taxpayer was poorly advised and had absolutely no intention of making an incorrect claim, penalties can still be up to 100%. 

Where does that leave the taxpayer?

The takeaways from this are: first, that it is even more important that your R&D claims are accurately prepared and can stand up to HMRC scrutiny. Second, it prompts the question: ‘how comfortable are you that your past claims could withstand the same scrutiny?’.

How can we support you?

Our specialist Intellectual Property team prepare R&D claims in accordance with a thorough process, backed up by detailed analysis, which is recognised and appreciated by HMRC. Additional internal checks continue to be performed before any claim is submitted, focusing on the areas where we know HMRC have been raising enquiries and challenging claims. This approach is the most appropriate, as it ensures that all of our submitted claims are as robust as possible, an outcome evidenced by the negligible number of enquires raised into our claims nationally each year. 

As a result, whether you are considering making an R&D claim for the first time and are unsure whether you qualify, have historically made a number of R&D claims but would like to ensure your claims are robust / have been optimised, or have recently had a letter from HMRC questioning your R&D claim, please do not hesitate to contact Chris Ridley.

Get in touch

If you’d like further information on any subjects discussed in this article, please don’t hesitate to get in touch via the form below.

Contact us today