HMRC are cracking down on wrongful and fraudulent Research & Development (R&D) tax relief claims – here’s what you need to know.
Background
In the midst of vaccine rollouts and a climate of much needed business support, R&D has never been more topical. With more and more R&D claims being made each year, HMRC are focusing on compliance – with the National Audit Office estimating the level of related error and fraud at over £300m a year.
Three things that have changed
- HMRC have already recruited an additional 100 extra staff to review R&D claims
- Plans are in place for a ‘random enquiry programme’ of R&D reliefs, in order to better understand the levels of error and/or deliberate over claims
- A maximum cap is being implemented on SME scheme cash claims, from 1st April 2021. This will cap the cash credits for an SME to £20,000 plus 300% of the company’s total PAYE and NICs liability for certain businesses – this could have a significant impact for SMEs that share R&D resources across their corporate group and/or outsource to third parties
What does this mean for you?
HMRC moving forward are going to be far more stringent in their entire processing of R&D tax relief claims. With more enquiries from HMRC of the claim, to more emphasis being placed on the quality of the evidence being used to substantiate the claim.
The latter point is of particular significance when putting your case together and you should be looking to consider the following:
- Claims should have clear eligibility assessments and project documentation, demonstrating the technological advance in question
- The documentation of the claim should focus on the underlying technical development, rather than on its functional requirements
- Make a clear strategy for your claim – consider how you identify and collect relevant data, as well as how you present the claim to HMRC and how you interact with them
For more advice on how to put together a robust R&D tax credit claim, please contact our tax team on 01788 539000 or email [email protected].