Will HMRC investigate your R&D tax claim?

Believe it or not, claiming R&D tax credits can result in a tax savings of £25 for every £100 spent on qualifying innovation.  HMRC R&D reliefs are designed to support companies that work on forward thinking projects in science and technology, yet many businesses are still not making the most of the R&D system. Why? Well, while some overlook the level of innovation needed to claim, others are intimidated by the somewhat detailed claims process which requires time and thought.

Furthermore, those that do submit an R&D tax claim may be wary of a tax investigation. Of course, the HMRC only wants to fund suitable business ventures, so it’s only natural that they’re on the ball when it comes to assessing claims – but what may trigger an enquiry?

  1. Over claiming

As tax incentives from the government designed to encourage businesses to invest in research and development, credits of this kind are not supposed to be daunting – indeed, they’re designed to help.That said; HMRC’s guidance on claiming R&D tax credits (which runs to several hundred pages) puts most businesses off going it alone. Either they just don’t bother with the whole process, or they get it entirely wrong and over claim – an act which can prompt an r and d tax credits investigation.

Moreover, the claim needs to make sense. It’s essential to develop a methodology and logic that can link the qualifying work to the qualifying costs. This must stand up under investigation.

hmrc r and d claim

  1. A poor report

One of the most important parts of an hmrc r and d claim is to produce a coherent and cohesive technical narrative. This should present the company’s R&D work in a way that passes HMRC’s inspection without further questions. If the company can prove they qualify for tax credits from a technical perspective, further enquiries are unlikely. If the report is poorly written or not convincing, however, the HMRC can ask probing questions to find out if you deserve financial assistance.

Essentially, the r and d tax credits claim need to explain how an R&D project:

  • Looked for an advance in science and technology
  • Had to overcome uncertainty
  • Tried to overcome this uncertainty
  • Couldn’t be easily worked out by a professional in the field

As the report needs to be as detailed and technical as possible, it’s important to have it written by a developer or technical-person (not a manager) that was directly involved in the R&D and who genuinely believes that the technology is innovative.

  1. Claiming all your staff are working on R&D

Most companies are comprised of sectors. While some people may be working directly on R&D projects, others may be overseeing tasks that are completely unrelated to R&D,which should be taken into account when submitting your report to avoid suspicion. Explaining who is involved with each project and why is the key to minimising risk and dodging a time-consuming enquiry.

If you are looking to claim R&D tax credits, R&D Tax Solutions offers the help and support needed to prepare the relevant documentation, assisting companies in many industries from engineering and manufacturing to software, food and drink, and aviation.

Post Author: Jennifer Slegg

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