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R&D claims come under increased scrutiny

31st Oct 2017
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Closer look

The amount of R&D tax relief claims which HMRC is investigating has increased dramatically in the past year, according to law firm Pinsent Masons.
The figure has spiked from £90m to £425m. It’s a rise that that Ian Hyde, a partner at Pinsent Masons, suspects is related to the growing popularity of the Research and Development Expenditure Credit (RDEC) scheme.
“With a rise in the number of R&D claims made by large firms, partly because of changes to how they can claim relief, HMRC is reviewing these claims more carefully," he said.
But the actual £425m figure isn’t quite as dramatic as it sounds, though. As Hyde also points out, despite HMRC claiming the tax claims are being investigated, “it does not mean that the credits are not due”.
The £400m is the headline figure which HMRC estimates may not have been properly claimed. “The amount of credits that HMRC will actually deny as a result of its investigations will be significantly lower.”
Jennifer Tragner, director of the R&D consultancy Forrest Brown, isn’t that concerned by the news, emphasising Hyde’s point that the figure relates to inquiries being made. “A robust, well prepared claim, prepared in good faith, has got nothing to worry about,” she told AccountingWEB.
She did point out, however, that HMRC is becoming more savvy in how it deals with highly technical, specifically software-related, R&D claims. “For the last 18 months they [HMRC] have been using their own internal IT team to consult with them so that they can better understand, in particular, claims for software R&D.
“So they’ve been establishing a process to use them on a consultancy basis to give them a better oversight and scrutiny over software R&D claims.”
Despite the increased scrutiny, it’s a development that Tragner sees as a positive change. “In our experience dealing with HMRC inquiries it’s been positive because they’ve been better able to understand and ask relevant questions.
“It shouldn’t be a concern; it’s not an area that should worry anyone if they’re putting together a well prepared claim.”

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