HMRC increase compliance check for R&D Tax Credit Claims

For a while there have been indications from HMRC that they will be increasing its compliance checks of the R&D Tax Credit scheme, due to a sharp increase in the number of claims over the last 18 months. The first indication that this was underway was an announcement in May that processing of certain claims would be paused while it investigates irregularities it has found.

This move was bolstered on 14 June, when HMRC announced they will be enhancing our extensive compliance checks on R&D claims, this also meant that they are extending their standard processing target for R&D claims from 28 days to 40 days.

The move is to mitigate potential abuse of the tax relief and the tax authority has admitted that it will result in delays to processing times for other R&D tax credit claims - a delay that many businesses could do without, particularly in the current climate where the balance between income and expenditure has never been more pronounced. At Vantage R&D we welcome the fact that HMRC is cracking down on any abuse of the scheme, as we have seen claims from other providers that are incredibly weak, and their clients will not be made aware how serious the repercussions are for making a fraudulent claim.

So, what do businesses need to do to ensure they are not impacted by HMRC’s apparent desire to uphold and challenge certain R&D claims?

To ease any pressure on cashflow, submit your R&D claim as soon as possible to mitigate any delays in payment. When submitting a claim, make sure you clearly define your case and how you arrived at that decision, to prevent any potential challenges on HMRC’s part, completing all entries on the R&D section of the corporation tax return (CT600 form)

Ensure you submit a well-structured, technical report to support your R&D claim, clearly showing what the advance was, what was the technical uncertainty within it and why the competent professionals within your business couldn’t readily solve the uncertainty. HMRC state that submitting additional information to support any claim, such as an R&D report, will also help HMRC to process claims quicker. In addition, detail reporting and the logic of how the expenditure figure was arrived at, will also leave HMRC in no doubt about the validity of the claim.

Choose an experienced R&D tax specialist who can guide and support you through the process, as the tax authority has warned that if a claim is incorrect, inflated, or fraudulent then a penalty could be issued.