Will HMRC investigate your R&D tax claim

US Tax Form 1040

Submitting a tax claim can carry with it some level of concern even for the most experienced business. There’s always the possibility that this year, it’ll be you that faces an HMRC enquiry, and that’s no different when making an R&D claim. Naturally there are certain triggers that will initiate an enquiry, so in this post, we look at what these are and how to handle an HMRC R&D enquiry.

What triggers an enquiry?

As with other tax claims, certain red flags in an R&D return will initiate an enquiry.Two of the major reasons HMRC will pick up on a risk are to do with a lack of supporting evidence.

Claims that are submitted without either a full cost breakdown or a report adequately explaining the advance or improvement in science or technology that has been sought are more likely to become the subject of investigation. Therefore, when completing your claim for R&D tax credits, be sure to provide both of these documents.

This is especially pertinent if you’re submitting a claim for the first time.It’s advisable to err on the side of caution and provide plenty of detail rather than producing vague explanations, as if the documents don’t contain enough information, an HRMC R&D enquiry is possible.

Other triggers include:

  • A high number of staff seem to be involved with R&D
  • A director is using their own ‘connected’ company to carry out sub-contracted R&D
  • The calculations or methodology used in the claim are poor

What to do if HMRC raise an enquiry

It goes without saying that the best way to effectively field HMRC R and D enquiriesis to ensure your tax return is accurate in the first place. Getting a tax specialist involved is a good way to guarantee your calculations are correct and you receive the relevant advice when filling out the paperwork. R&D claims are notoriously complex, so having a professional on hand is advisable, particularly if this is your first claim.

If you do find your business under enquiry, the first thing to do is re-check, or have a specialist re-check your figures. If you find a mistake in the original claim, it’s best to notify HMRC as quickly as possible. Volunteering information often works in a company’s favour and may even reduce the penalty for making an incorrect claim.

If you believe your claim is correct and can be defended, it’s not too late to enlist the services of a tax specialist who can check the figures and confirmyour belief.If the claim is accurate many companies will liaise with HMRC on your behalf, provide assistance with additional information that’s requested, and work to achieve a successful outcome.

Finding an R&D tax specialist

Finding a professional to assist with your R&D tax creditclaim is highly recommended to help avoid mistakes when you fill in your return. R&D Tax Solutions has experience working with businesses in a range of sectors and will provide a reliable and honest service when it comes to submitting or defending a claim. Contact them on 0161 298 1010 to find out more.