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What Specifics Does HMRC Look Into During An R&D Tax Credit Claim?

Posted on August 11, 2021

As helpful and generous as the R&D Tax Credit scheme is for companies, there are some that abuse the system. The loopholes in the scheme make the incentive prone to fraudulent activity, hence why HMRC have invested heavily in 2021 for the internal system to become strengthened with obstacles to prevent these activities from occurring often. This investment has created new policies where they look at specifics within a claim to challenge it. 

Above all else, it’s important to note that HMRC does not publish its own strategy for how they deal and decide with R&D tax credit claim checks and which ones they deem a success or a failure, suited to their guidelines of the scheme. We have worked with HMRC for over a year (and counting) and spotted a common trend with the specifics of what they look into. 

  1. Corporation Tax Return Error 

Accounting errors can occur from time to time, however, one specifically important variable on the cash flow statement is the corporation tax return. If the result of this turns out that the claim is larger than what it is, then it would lead to an immediate enquiry. This specific error can happen through the mix-up of corporation tax return boxes for SME’s R&D claims and RDEC claims. RDEC claims is a scheme designed to aid in R&D costs but focus directly on larger companies with over 500 employees. Due to this very reason. We at Green Jellyfish insist that your client’s corporation tax returns are to be double-checked to ensure the correct R&D claim boxes are correctly filled. 

  1. Specific factors that stand out within the Claim 

It is important to note that when dealing with HMRC, you are essentially dealing with a taxation body that has all the financial information about your business. This means that they have previous historical records on your finances and as a result, compliance checks are undertaken. Having specific factors that stand out within the claim can attract unnecessary attention that could potentially delay your claim even further. This can be anything from the track record with HMRC compliance, having substantially high costs that may look exaggerated (in their view) or simply that more information is needed in the claim. 

Although these are two specific factors that HMRC focus on with the claims, it is important to remember that the majority of the time, the claims are reviewed on a random basis. No matter the size of the claim, the type of claim etc. In their guidance policy, HMRC has stated that they aim to check all regular R&D tax credit claimants at some point, this doesn’t necessarily mean that it will be checked straight away. These could be checked potentially a year from when the start of the claim occurred, therefore it’s always best to be prepared for the inevitable and ensure that the right R&D Tax Credit specialists are chosen to see your claim through to the end. 

If you are looking to make an R&D Tax Credit claim for your business (of any industry), the Green Jellyfish team are more than happy to help. 

Contact us at 033 000 20010