Will HMRC investigate your R&D tax claim?
When it comes to submitting your HMRC R&D tax claim, it pays to be as thorough and diligent in your record keeping as possible. After all, no business wants to receive the dreaded phone call, letter, or email informing them that an investigation has been opened to take a detailed look at your submission. But what might prompt an investigation and what should you be wary of when it comes to the time of year that you’re looking to capitalise on R and D tax credits?
Following the necessary procedures and keeping extensive records is, of course, the most obvious means of avoiding any investigation into your tax claim. Whether that means working with an experienced HMRC R and D tax expert or submitting your claim yourself, understanding precisely what the requirements are will ensure the successful processing of your submission.
What triggers an investigation?
Of course, not everybody will be able – or in some instances, prepared – to employ an R&D tax expert to ensure compliance. As such, the potential for errors to be made is alltoo real, with the complexities of the procedure often proving stumbling blocks for businesses. This can subsequently lead to ill-prepared submissions prompting HMRC to begin an investigation into your claim.
Some of the most common mistakes that trigger an investigation include:
- Making a large R&D claim that has been submitted without a full cost breakdown or even an accompanying R&D report
- Company directors using their own ‘connected’ company as a subcontractor for R&D activities, even if the working relationship is legitimate
- Claiming that either all – or most – of the staff employed by your business is engaged in R&D, particularly if you have revenue streams into your company
- An inability to fully explain the improvement in science or technology made by the research and development work that has been undertaken
- Use of poor or inadequate calculating methodology for the qualifying costs of your R&D activity.
What to do in the event of an investigation
Should you be in a position where the HMRC opens a case to investigate your claim, the first thing you should be prepared to do is enlist the services of experienced R&D tax specialists. This area of tax is among the most complex, so it’s not unusual for a mistake to be made when you’re trying to compile the necessary information.
Employing an expert in R&D tax after a case has begun, however, will enable you to determine whether it can be defended or not. They will check the figures and reports submitted and, in the event of finding a mistake, will be able to liaise direct with HMRC to inform them as soon as possible – an act that will work in your favour and may well help you avoid any penalty.
Manchester-based experts, R&D Tax Solutions, offer expertise and support for businesses of all sizes looking to process their R&D claim effectively. You can contact the experienced team today by calling 0161 298 1010.