An inaccurate or flawed R&D tax relief claim can not only sour the reputation of a company, it can also break down relations with HMRC.  Our tax team member, Kate Knight, shares her tips on ensuring a correct claim and minimising the risk of incorrect submissions.

Common mistakes with R&D tax claims

  • Picking projects that just don’t meet the criteria: In my experience, this is one of the most common issues.  Focus is often given to the aspects of innovation and important points such as the science and technology of the eligibility test are overlooked.
  • Incorrect identification of project boundaries: Often the whole cost of a project is submitted when it is quite obvious that only small elements are eligible.  This adds administration time to processing the claim, irritates the claim assessor and will, most likely, just result in a refusal.
  • Inclusion of non-qualifying costs:  ExamplesWe often see refused claims that have included costs such as rates, benefits in kind, rent, downtime costs, company credit cards and cost of materials transferred to end user for money/monetary value.  All of these will lead to a refused claim as these are just not qualifying categories.

It costs money to submit an R&D claim, using up time not only of the business and their consultant, but also HMRC, and it is surprising how many businesses get this wrong. It automatically flags ups that company as not being professional, either through deliberate “trying of the system” to simply being inefficient and not doing their research.

Understand where you need professional advice

Claims for very straightforward R&D projects can often be prepared internally or with a regular accountant.  The issues come where non-specialist firms or internal departments try to navigate the more complex submissions, involving areas of conjecture.  The average accountancy firm simply does not have the qualifications and expertise required to deal with these claims.

Seeking a provider with experienced employees, with the necessary up-to-date qualifications and knowledge, will remove the risk of wasting your time and money with someone who is simply not up to the job.  Ask for references and to see their claims submission stats and make sure they are members of professional bodies such as the ICAEW, CIOT or ICAS.  Some of the “tricks” used by non-professional firms include making inflated claims in order to maximise their fees.  This is a real danger as can really damage a company’s relationship with HMRC and can even lead to fines and penalties.  If your provider is reticent to engage HMRC in the process from an early stage, then this should ring an alarm bell.

Why should you involve HMRC in the claims process from an early point?

Engaging HMRC earlier on means that they can review and sign off process and methodology at an early stage, before more complex work is done in the detail of the claim.  In the long run, this saves a lot of time for everyone.

For larger companies, the HMRC Client Compliance Managers (CCMs) are often the best starting point and they have specialist R&D advisors who can assist, making early involvement really beneficial.   For smaller companies, you can use the “Advanced Assurance” process for the smallest of companies, but this is not always utilised correctly.  There is also a telephone support line for specific queries.  A reputable firm, assisting with your R&D claim, will liaise with all of these on your behalf.

How can I be confident that my claim is ready for submission?

This comes down to getting specialist, technical advice.  In any instance, asking someone not specialist in R&D claims is not going to give you a reliable confirmation before your claim submission as they will not have sufficient understanding of the legislation or technical understanding.

kate knight tax meta

Kate Knight

Kate is part of the META tax team, fully experienced and qualified in dealing with R&D claims.  You can talk to her or the other team members about your R&D claim today.