At RandDTax we are dealing with an increasing number of clients who have submitted R&D claims, been paid the tax relief and then told by HMRC - maybe years later - that in fact, their claim is invalid. We’re asked to intervene, review the claim and try to salvage it. Unfortunately, this isn’t always possible, and companies are having to pay back money they’ve been awarded because the original claim didn’t comply with the rules.
The money they received is spent, where do they go now? Many companies don’t survive that size of financial hit.
Having an R&D professional in place to guide a company through the minefield of claiming can avoid all the unnecessary time, stress and financial pressure of an incorrect claim. Of course, this is where we at RandD Tax come in, but for anyone considering making a claim, there are a few things worth knowing before you start.
Why are so many invalid R&D claims being incorrectly awarded?
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Only 5% of submitted claims are checked in detail! Shocking isn’t it? This hard-to-believe statistic is due to the large volume of claims being submitted and the limited resources available to the R&D department within HMRC. This has led to complacency and (in some cases) abuse of the system, with companies submitting incorrect or incomplete claims.
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50% of claims have no supporting documentation Companies rarely understand the full extent of what is required to support a claim. Without the correct supporting documentation, a claim is invalid. There must be a detailed technical justification and a summary of costs attached to every claim.
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Companies that file their own claims often don’t understand the rules Understanding the rules and sticking to them when making a claim is paramount. A specialist will fully explain the rules and check that all the costs are correct.
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The rules and guidelines change slightly each year Companies don’t have the inhouse expertise to keep track of the most up to date criteria and rules. It’s a confusing area as it is, and this really doesn’t help!
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The R&D scheme is complex and detailed Companies are cutting corners by receiving advice from less qualified sources As with any professional service, advising on R&D tax is a specialism that should be left to the experts. Is an accountant, for example, best placed to identify what is a technological advance? Would they be able to defend their claim(s) to an HMRC inspector and explain where the advance in science or technology has occurred?
How secure is your R&D tax claim?
It’s extremely important that all R&D tax claims are accurate and include full supporting documentation. At RandDTax we provide a complete R&D service and our Compliance Team checks every claim before it is submitted. Should there ever be any questions raised or clarifications necessary, we will liaise directly with HMRC on your behalf and (in the unlikely event of a full investigation) we will be there with you to defend your claim. This not only gives our clients peace of mind but protects them now and in the future.
Here’s why there are companies like ours that specialise in R&D tax relief claims:
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Getting a claim wrong is expensive. Getting it right before you submit is much easier than unpicking and defending an incorrect claim if HMRC want to investigate. Defending an R&D claim could cost many thousands of pounds and that doesn’t even account for your own time and resources.
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HMRC can go back 6 years during an investigation and can even extend beyond that period if they suspect previous claims may have been fraudulent or deliberately misleading.
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Claims are never approved by HMRC, they are simply processed, so receiving a payment does not eliminate the likelihood of an investigation.
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HMRC are clamping down. More and more claims are being checked and they will demand repayment (and can impose significant fines) where R&D tax relief has been claimed incorrectly.
Compliance is key
Every aspect of your R&D claim must comply with the latest HMRC guidelines and the only way of making sure your claim is compliant is by using an experienced R&D company.
You have to remember that a processed claim is not an approved claim and if HMRC discover benefit has been claimed in error, they will expect you to repay the full amount. Many companies carry on in ignorant bliss, focusing on the benefit being received year after year without realising that their claims are incorrect or incomplete and an investigation is waiting just around the corner.
Who processes your R&D claims? Are they qualified to provide the information and guidance you need? Do they have the relevant specialist experience? If not, you are compromising the security of your claim.
Get in touch
If you’d like more information, or you’ve already received a letter from HMRC regarding a badly prepared claim, get in touch to find out how RandDTax can help you to minimise the damage, before it's too late.