Guides: A guide to HMRC R&D tax credit enquiries
Let’s be honest, the thought of any attention from the HMRC is uncomfortable to say the least and for many businesses, the prospect of an HMRC enquiry is daunting. It’s entirely understandable that you would want to have no more interaction with HMRC than what’s legally required, particularly when considering whether you should undertake an R&D tax credit claim. In this guide I’ll unmask the ‘worry’ that is an HMRC enquiry, what it is, why it happens and what to do. I’m confident that at the end you’ll conclude that the bark of an HMRC enquiry is far worse than its bite… and definitely not worth missing out on the benefits R&D tax credits can provide your business.
“What is an enquiry, and why are they raised?”
Put simply, an enquiry is a ‘check’ of the information reported to HMRC. Enquiries are raised by HMRC for several reasons. It may be that HMRC have questions about the overall tax position in general, or it may be because there is a suspected inconsistency. Checks are also carried out at random, although on occasion, some checks may be undertaken for R&D tax credit claims within a sector, particularly where a new piece of technology is being explored or developed.
As irritating as it seems the motivation behind the enquiry is good, ultimately ensuring the integrity of the wider tax system, maintaining the R&D Tax Credit scheme and preventing abuse. In our experience enquiries are not to be feared providing you have been transparent and timely with both HMRC and your professional advisor.
“What are the consequences if my R&D tax credit claim is found to be negligent?”
With everything if you break the rules there are consequences and for claims HMRC find to be negligent, they can enforce penalties of up to 100%. These penalties are generally based upon the potential lost revenue to HMRC, and interest is charged in line with the Bank of England base rate. For R&D tax credit claim enquiries, the benefit value of your claim could be reduced, even to nil, in addition to the penalty being charged. It is also worth noting that the outcome of your R&D will not be paid until the enquiry has reached a conclusion which could trigger a further strain to cash flow.
With such high stakes, as part of MPA’s process there are several steps and stringent reviews undertaken to ensure that all claims submitted to HMRC are honest, transparent and demonstrate that the conditions of the R&D Tax Credit scheme have been fulfilled.
“What makes MPA different?”
We have a strong working relationship with HMRC and will only ever submit robust R&D tax credit claims, which is why our claim success rate is 100%.
Furthermore, we will defend every R&D tax credit claim that we submit in the event of any HMRC enquiry or compliance check at no additional cost. Differing dramatically from other tax and accountancy firms, who make enquiry defence an additional service and charge for additional time spent defending a claim. We have found that our approach to defence provides clients peace of mind when considering undertaking an R&D tax credit claim and engaging a professional advisor.
MPA are so confident in the quality of our work that our fees for an R&D tax credit claim are charged on a success basis.
“Help! HMRC have opened an enquiry into my R&D tax credit claim”
If you, or your accountant, have submitted an R&D tax credit claim which is now subject to an HMRC enquiry, please don’t fear. MPA can help. We have a team of tax specialists and countless industry experts who have helped many clients navigate the complexities of an enquiry, helping to secure the maximum value possible. In some instances, we have been able to identify additional qualifying expenditure, leading to even higher returns than initially anticipated.
HMRC will consider the quality of the disclosures made, as well as the attitude of those responsible for the claim when considering how best to deal with the enquiry. Following completion of an enquiry, it is highly important that the feedback given by HMRC is taken on board and that guidance has been adhered to.
MPA are a leading R&D tax credit and Patent Box reliefs specialist and with our in-depth experience, you can rest assured that your R&D tax credit claim is in safe hands. Every day we help numerous companies unlock valuable reliefs available to them; get in touch today to discuss your individual circumstances.