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The common mistakes in R&D claims and how to avoid them

18 May

The common mistakes in R&D claims and how to avoid them

by Georgina Swain
in R&D Tax Relief
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The regulations for Research & Development (R&D) Tax Relief claims is a lengthy section of legislation in the Corporation Tax Act.  It comes as no surprise then that, without knowing every detail of the legislation or having the professional experience, costly errors and misinterpretations often occur.

HM Revenue & Customs (HMRC) operates R&D specialist units to examine R&D claims to ensure compliance and avoid misuse. Errors in R&D claims can be looked upon very seriously by the Revenue, especially anything that appears to purposely increase the value invalidly. This can result in an enquiry, leading to the reduction or rejection of the claim – as well as the possibility of a fine and a time-consuming tax investigation into the company.

HMRC has published some of the common errors made in R&D Tax Relief claims:

  • Project activities outside the scope of R&D for tax purposes are included in the claim.
  • Expenditure outside the qualifying categories is claimed.
  • Staffing costs are claimed in respect of people who are not employees of the company.
  • Claims are made in respect of overheads that do not qualify as consumable items or consumable stores.
  • Expenditure is claimed on a particular item for a period before it was in a qualifying category.
  • Special rules for connected parties are not applied.
  • Companies do not recognise they are not SMEs.
  • SME’s failing to make claims under the Large Company Scheme.
  • A loss previously surrendered for a payable tax credit is carried forward.
  • Unconnected subcontractor expenses are not restricted to 65%.
  • The PAYE & NIC liability for the period in respect of employees of the company is less than the payable tax credit claim. This restriction was removed but a similar cap has been reintroduced that claimants need to be aware of.
  • A payable tax credit claim is made for expenditure that only qualifies under the large company scheme
  • No account is taken of subsidies or Notified State Aid

These errors are most common when companies don’t engage specialist help.  We also see companies underclaim without specialist support as they are unaware that certain activities or costs can be included.

Beavis Morgan’s specialised R&D Tax Relief division can add value and security to your R&D tax claim with minimal time required from you. Our priority is to optimise your claim with the highest standards of compliance and produce a robust technical and financial report capable of withstanding any scrutiny by HMRC, thereby ensuring a straightforward and financially rewarding claims process.

As a regulated practice, we are proud of our 100% success rate with R&D tax claims, which we feel sets us apart from many other businesses offering R&D claims assistance.

For further information, please get in touch with our experienced and professional team to find out how we can add value, security and efficiency to your R&D Tax Relief claim. Contact Rebecca Heap on T: 0207 549 2357 or E: Rebecca.heap@beavismorgan.com.