HMRC has suspended some R&D tax claims pending review
HMRC has released new information around potential delays to R&D Tax Credit claims while it investigates irregularities.
The move comes as part of a crackdown on abuse of the relief, with some claims now being re-investigated. However, despite the majority of claims appearing to be unaffected, delays in processing times are possible.
HMRC has asked any affected by delays not to contact the R&D mailbox or helpline to enquire about the progress of their claim. It has instead asked that agents and companies keep an eye on their online account for updates on the status of their claim.
To help HMRC process R&D tax claims promptly, all entries on the R&D section of the Corporation Tax return (CT600 form) must be completed in full.
The Myriad Associates team will update our website and social media should any further information be released. And of course, if you would like to find out more about R&D Tax Credits and how partnering with us can benefit your practice, drop us a message or call 0207 118 6045.
What irregularities in R&D tax relief claims can attract HMRC attention?
Any company that is thinking of going it alone and making a ‘DIY’ R&D tax claim should be strongly discouraged from doing so. But most accountancy practices also find they don’t have the skills and expertise in-house to complete maximised R&D tax claims successfully.
HMRC are well within their rights to investigate an R&D tax relief claim at random, or because there’s something it doesn’t like the look of (however innocent). We’ve known this to occur sometimes several years after the resultant relief has been paid.
This is why many accountancy practices who wish to branch out into R&D tax claims partner with a specialist R&D tax consultancy. It essentially gives access to a whole department of expert R&D technical advisors that can take everything off your hands and make life much easier.
With regard to the main reasons why HMRC may investigate an R&D Tax Credits claim, there are many common pitfalls. However, the three most common reasons we come across are as follows:
Claiming for costs that aren’t eligible R&D Tax Credits in the first place
Understanding the ever-changing criteria and how it applies your client’s specific project costs is baffling at best. This is even the case if you’ve come across R&D tax claims before, because every one is unique.
When presented with a list of your client’s R&D costs broken down individually, identifying which ones can be included and which can’t is a massive challenge. We seen it happen all too often; additional expenditure that, on the surface, look like classic R&D but actually it isn’t and shouldn’t be added. Likewise, this occurs in reverse too - where expenditure that is eligible isn’t accounted for which therefore leaves money on the table. Again, this is why partnering with Myriad Associates makes sense as we make sure all claims are absolutely watertight before submission. We’re also very proud of our 100% success rate.
Claiming under the SME scheme when it should be RDEC (or vice versa)
The R&D Tax Credits scheme is subdivided into two branches: the SME scheme (typically used by small/medium sized businesses) and the Research and Development Expenditure Credit (RDEC) scheme for larger companies.
Before making a claim, it’s crucial to understand which of these branches your client’s company falls under. In legal terms, HMRC classes a larger company as having more than 500 employees, and an annual turnover exceeding €100 million OR a balance sheet above €86 million. A company falling below these criteria is considered an SME and should typically use the SME branch of the scheme (except for if it has previously received state aid). Find out more in our recent blog: What's The Difference Between The SME Scheme And RDEC?
Not keeping up-to-date, accurate R&D records
Claims for R&D Tax Credits can be made up to two years following the end of your client’s accounting period. So if for instance their accounting period ended on the 31st December 2020, they have until the 31st December 2022 to make their application.
However, as with all areas of accounting accuracy in record keeping is essential. It will form the basis of your client’s R&D Tax Credits claim, not only in terms of providing figures but also in explaining the details of the project and why it qualifies. Clearly maintained records not only means claims can be fully optimised but if HMRC does come back with any issues justification is easily at hand. In a nutshell, the more information available the better.
In addition to accounts, there should be ready access to things like project planning details, CAD drawings, technical specifications, weekly production schedules and revisions and any software architecture documentation.
This article is brought to you by Myriad Associates
“We discovered Myriad Associates at Apps World London and have been delighted with their technical knowledge, costing expertise and understanding of the HMRC R&D Tax Relief Scheme” - Ondrej Rafaj, Director, Fuerte International Limited.
The Myriad Associates team is made up of R&D tax experts that can work remotely with accountants across the country to achieve the R&D tax relief their clients deserve. Our robust relationship with HMRC and 10 years plus in business mean every claim is fully maximised ready to plough back into innovative projects.
Let us help you help your clients with their R&D tax relief claim.
If you’d like to discuss any aspect of R&D tax relief or working with us, call our team on 0207 118 6045. You can also send a message and we’ll call you back.
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