HMRC has found that half of all research and development (R&D) claims by small and medium-sized enterprises (SMEs) are not compliant. This means that they are either not genuine or do not meet the government’s definition of R&D.
The findings, which are based on a sample of 1,000 claims, come as the government faces increasing pressure to crack down on R&D tax avoidance.
The government paid out £5.1 billion in R&D tax relief and credits in 2021-22, and most of that went to SMEs.
The most common reasons cited for non-compliance are:
- Failing to meet the definition of R&D
- Not having the necessary documentation to support the claim
- Overstating the amount of R&D expenditure
HMRC is now stepping up its enforcement efforts to clamp down on R&D tax avoidance. Businesses that are found to be making non-compliant claims could be liable for penalties and interest.
So, if you’re an SME that’s thinking about making an R&D claim, be careful. Make sure you understand the rules and that you have all the right paperwork. Otherwise, you might find yourself in deep water.
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Our tax team’s focus remains in ensuring R&D claims are legitimately maximised. If you would like advice on an R&D tax relief claim, be it past, present, or future, our team will be more than happy to help. Get in touch below.
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