To prevent abuse of research and development (R&D) reliefs, HMRC have recently announced that they will be enhancing their compliance checks. This has resulted in delays to the processing time for claims, increasing the standard time from 28 days to 40 days. In reality it is taking longer for any payments due to be received by the claiming company.
Stamping out misuse of R&D tax credits has become a top priority for HMRC, who are making it clear that they will be taking a harder look and scrutinising claims in more detail, to try and stop the abuse of the scheme.
We have been contacted by several companies who have received letters from HMRC, informing them that their claims are under review as HMRC have questions regarding the claim and any payment has been withheld. The company is then invited to contact HMRC as a matter of urgency if they believe that they are entitled to claim. The letter also carries a warning that if the company does respond, any information it provides can be used in a criminal investigation into the claim.
This demonstrates the hard line HMRC are now taking with regards to R&D claims.
There will be companies that receive these letters from HMRC and have claims that are within the guidelines of the scheme and may just need to provide more detail to enable HMRC to complete their checks.
However, from our recent experience of reviewing previously submitted claims, many companies who believe they submitted accurate claims had several errors within their claim.
These can range from projects that do not qualify under the scheme guidelines, including costs that aren’t allowable and claiming under the wrong scheme.
We recommend that any company in receipt of a letter from HMRC should contact an R&D tax professional with the relevant experience, and preferably regulated, to ensure they are providing the right advice for the company.
We fully support HMRC’s attempts to reduce misuse of the R&D tax credit scheme and hope it will lead to the scheme only rewarding those who are eligible, and it is no longer taken advantage of by advisers who are not working for the best interest of the client.
With this increased level of scrutiny and clear focus of HMRC to assess claims in more detail, now is a good time for companies to have their claims reviewed.