Finding the Goldilocks Zone when claiming your R&D tax credits

You’re probably well aware of the amazingly generous R&D tax relief/credit scheme that both HMRC and the UK Government want to promote.

However, you may not be aware that only a small minority of companies are actually claiming the correct amount.

I’m not just talking about underclaiming – in fact a high proportion of incorrect claimants are overstating their R&D and leaving themselves vulnerable to lengthy HMRC enquiries.

Whilst maximising the value of your claim seems a reasonable thing to do so as not to miss out on vital cash, maximising it without strong evidence of qualifying activity is a risky undertaking, which raises an instant red flag for HMRC, meaning instead of a cheque you might receive a letter triggering a lengthy and unpleasant enquiry and a long delay of your claim.

Knowing what you can and can’t claim for is a crucial part of the process. HMRC allows only specific categories of expenditure to be included in the R&D claim. Whilst HMRC offers exhaustive guidance on the legislation, it is not always straightforward when it comes to putting all the figures together. The rules for R&D tax credits are complex and nuanced in places, and it is only through experience and a thorough understanding of the different qualifying costs and activities that allows us to prepare robust claims with confidence.

Whilst there are intentionally fraudulent claims being submitted to HMRC as in this recent extreme example of a fraudulent claim, there are cases when inaccuracies and errors creep up in totally eligible claims. It is also common for businesses to unwillingly repeat the same mistakes in subsequent years until the numbers in their claim grow, along with the risks of inquiry and penalties. If R&D is not your daily job, a serious misunderstanding of either the costs calculation or technical evidence preparation processes can jeopardise the claim and leave you with less cash and more stress.

This is why you should think carefully before going solo, and why you really shouldn’t underestimate the value of specialist R&D tax advice.

Our Free Audit can identify inaccuracies to optimise your claims, to maximise your benefit and minimise your risk of an investigation.

We are at the forefront of our industry, sitting on multiple HMRC committees to raise standards and our reputation is paramount. We do far more than just process claims: we guide you through your claim preparation process identifying activities, calculating expenses and putting it into the correct wording to ensure that your claim will stand up to HMRC’s scrutiny.

If you have any doubt, we are happy to talk through any concerns you might have and show you how a Free Audit can give you peace of mind and potentially increase you claim.

About author

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Tim Walsh
Tax Specialist