Risks Associated with R&D Tax Relief Claims

The HMRC machine for evaluating and approving them is getting better, but it's far from perfect, and inevitably many of the claims that still go through will be wrong.

THERE WILL BE SOME CLAIMING TOO MUCH AND OTHERS NOT ENOUGH; THERE WILL ALSO BE SOME WHO SHOULD NOT HAVE CLAIMED AT ALL

The government wants to ensure that only those entitled to tax benefits gain access to them, and this also applies to R&D tax credits. You can expect to see continued improvements in the diligence of HMRC when it comes to assessing the validity of future claims, this in turn will result in more questions and enquiries, a time consuming and on occasions a costly outcome. It's also inevitable that some past claims will be reviewed again in the future as HMRC's processes and technologies improve, a successful but incorrect claim will have inherent risks.

Know the risks.

Claiming for R&D tax credits is complicated. At around 500 pages long, the legislation is difficult to understand and interpret. You also need to know what technical information to include and be aware of any potential technological advances involved. Without all this, you're risking submitting an inaccurate claim.

If your claim is not accurate, you could lose thousands in relief or face the inconvenience of an HMRC enquiry or the pain of substantial penalties. HMRC Inspectors might even pay you a visit and your past and future tax claims could all be scrutinised too.

Case Study.

HMRC open a compliance check on R&D tax credits claims of Company A and Company B:

COMPANY A goes back to the paperwork and checks their R&D tax relief calculations. Company A offers that they made an error. HMRC see this as a "prompted disclosure" and penalty will be between 15 an 30% of the tax relief over-claimed.

COMPANY B has, in HMRCs view, deliberately over-claimed R&D tax relief, knowing that they should not, then this could attract the next tier of penalties, 30-70%

The most common problem we see from clients who have used other providers or self-claimed is where HMRC have asked for a full retraction of the claim. And it's not just that year's relief that is at risk - it's the annual relief in the future that will be almost impossible to justify if you cannot win an argument with HMRC on retraction of a claim.

That's where ABGI can help.

We are Innovation Funding specialists - with a team of technical experts that includes PhD trained scientists and engineers. Our Innovation Funding Consultants are not only industry sector experts, but equally knowledgeable when it comes to the scheme legislation. If you have eligibility, no one is better equipped to find it for you.

The efforts we put into recruitment and training, combined with the sheer volume of claims we submit, means that ABGI UK's level of knowledge is unequalled.

This means that we are ideally placed to assess whether any of your previous claims completed by others contain any inherent risks or opportunities. We can work with you to identify these extra opportunities and to identify and mitigate risks before they escalate into HMRC enquiries.

FOR A FREE R&D TAX CREDIT CONSULTATION AND ANALYSIS OF THE POTENTIAL RETURN YOU MIGHT EXPECT FROM YOUR PROJECTS, CONTACT THE ABGI-UK TEAM