R&D Tax Credits: Beware HMRC Enquiries
Successful R&D tax credit claims can play a vital part in the growth and success of a business. But, any irregularities can result in HMRC raising a compliance check against the claim. This not only delays and puts at risk the return expected from your tax relief claim, but also results in an often lengthy and stressful enquiry, alongside the threat of financial penalties related to the size of any errors HMRC identify. This is NOT good news for you and your business.
As part of an enquiry, HMRC requires clarification in the form of additional evidence to prove the claim. This is often complicated and onerous to find, and can take up to four years to satisfy HMRC adequately. Anything from invoices from offshore workers, to timesheets that are several years old can be required. During this time the claim remains unpaid, with time and energy drained out of the staff resources critical to the growth and success of a business.
HMRC is entitled to open a compliance check on any new claim up to a year following the claim’s submission, and can even go back 21 years if fraud or money laundering activities are suspected, so it pays to get it right the first time. They use a complex set of algorithms that can quickly identify claims that stand out from the norm. For example, an unusual ratio of time spent on R&D compared to the total wage bill and annual turnover of a company, or overseas subcontractors costing more than that country’s average pay rates would both likely raise a red flag in the minds of inspectors.
R&D tax relief claims compiled and submitted by companies themselves, without seeking specialist assistance, are more likely to result in compliance checks. In our experience 90% of claims we audit contain errors or are just plain wrong. Put simply, this is because most organisations do not have the experience, technical knowledge and understanding of what HMRC is seeking to best present the evidence required for a successful tax credit claim.
Let the experts handle it
R&D tax credit compliance checks can engender fear, spread uncertainty and add complication to the day-to-day running of a business. Companies prefer to avoid them at all costs.
MPA, which has completed more than four thousand successful claims for clients, knows exactly what HMRC is looking for when it comes to positively assessing a claim, and how to ‘translate’ it into the language that HMRC speaks. Right first time is the best approach, and nine times out of ten we are able to improve our client’s claim.
Less than 2% of our claims have resulted in compliance checks. In all cases we stand between our client and HMRC, removing stress and allowing our clients to focus on what they do best: running their business, while we maintain good relations with HMRC throughout the process. For example, our specialists scoured the outer reaches of a global client’s business to track down individual invoices in South America and Europe, and translated documents into English to satisfy the needs of HMRC.
This approach gets results.
Steven Garrod Managing Director at MPA
Successful R&D tax credit claims have a significant impact on businesses, helping to push innovation and achieve growth. But, in the quest to help HMRC and avoid an enquiry, it pays to trust an expert. And, if a claim should arise, MPA never deserts a client. We provide support and certainty to set out the best possible case to achieve claim success.
For more information on how to avoid an investigation on your claim from HMRC, get in touch.