HMRC Enquiry Supportfor R&D Tax Relief claims

HMRC is cracking down on R&D Tax Relief claims

A significant R&D Tax Relief compliance crackdown has been launched over the last year, with HMRC applying a volumetric-based campaign approach to R&D enquiries, and they now have over 500 staff working on R&D compliance. Cutting-edge technologies are being deployed to identify and penalise incorrect or fraudulent claims. Mandatory reporting requirements effective from 8 August 2023 will help HMRC risk profile claims even more.

This means accountants submitting claims on behalf of clients are under increased pressure to ensure their claims are watertight. With legislation changing each year, this may be easier said than done.

While most businesses claim R&D tax relief legitimately, many claims are inaccurate or fail to comply with the strict rules and regulations governing R&D Tax Relief.

An HMRC enquiry can be triggered in a variety of ways, including:

• Random selection
• A claim is especially complex
• A claim is of particularly high value
• Inconsistencies or errors are identified in the paperwork
• The claimant business has a history of non-compliance
• HMRC received intel from a whistle-blower
• A claim deviates significantly from industry benchmarks

Not all HMRC enquiries result from suspicions of wrongdoing, but it is essential to be prepared for the eventuality, particularly as an accountant conducting claims on behalf of clients.

How Radius can help

This must be managed carefully and appropriately if your client has been notified of an HMRC enquiry into a recent R&D Tax Relief claim. The process can be complex, with significant financial and reputational risk to the client and the accountant who submitted the claim on their behalf.

This is why the Radius team provides specialist advice on formulating the appropriate response to HMRC, including gathering all required information and managing correspondence with HMRC.

R&D Tax Reliefs are changing

In November 2023, the UK government announced that the current SME and RDEC schemes will be combined into a single R&D Tax Credit scheme. This will take affect for accounting periods beginning on or after 1 April 2024 and will adopt the existing RDEC rate of 20% For loss-making entities in the merged scheme, the notional tax rate will be reduced from 25% to 19%.

For more information about the incoming changes to the scheme, read our full Autumn Statement summary.