When we are talking to business owners who are quite clearly undertaking research and development about their rationale for not claiming R&D Tax Credits it is usually because they do not want to attract unnecessary attention from HM Customs and Revenue (HMRC).
These businesses are prepared to forego funding that they are eligible to claim because of a fear that the process may make them more liable to an HMRC enquiry.
Too good to be true…
There is a general belief from companies who are yet to claim R&D Tax Credits that any scheme that involves receiving a repayment from HMRC or a tax credit applied to an outstanding liability has to be too good to be true. There is going be a catch somewhere along the line!
Please be reassured that R&D Tax Credits are not too good to be true. Just ask any one of our clients!
The R&D Tax Credits scheme was set up by the government over 18 years ago to incentivise businesses to invest in research and development. Research and development activities drive economic growth and fuel the economy. From the perspective of successive governments the scheme continues to achieve its objective. It delivers a positive impact on UK Plc by helping businesses to maintain and expand their investment in innovation. There is no kick back from HMRC – they do not “give with one hand and take back with the other.”
A random affair…
It’s a fact – HMRC do carry out enquires and investigations, thousands of them every year across every branch of self assessed tax. HMRC Enquires are generally random, although there can be some weighting according to risk. For example cash based businesses are more liable than businesses with a clear paper trail.
Receiving notification from HMRC that your company is going to be the subject of an enquiry or investigation is quite simply one of the realities of being in business.
It’s not all bad
Most business owners view an Enquiry or investigation by HMRC as an expensive and stressful experience which is quite often the case.
However, when it comes to R&D Tax Credits the reality is often very different. Enquiries into R&D Tax Credits tend to be much shorter and a positive experience. By working with HMRC, systems and procedures can be improved to ensure that going forward the information submitted to HMRC has been prepared in the correct manner. If HMRC has advised on a process they are less likely to question that process in the future.
Stephen Bunting, Fiscale’s Technical Director, explains “I often advise clients that this is the one area of tax where an enquiry is not a bad thing. Even after 18 years, there are still many grey areas and an enquiry gives us an opportunity to agree everything with HMRC. The enquiries tend to be more of a case of HMRC getting a better understanding of a claim rather than looking for something wrong. Obviously, there are exceptions but generally the enquiries have a positive outcome for the client and HMRC.”
The Fiscale experience
Sometimes companies who are submitting a claim for R&D Tax Credits can be selected for an Enquiry. Since starting Fiscale in 2014 a small number of clients have been the subject of an HMRC Enquiry.
We handle the enquiry on behalf of the client, working closely with them from the receipt of the initial notification of an Enquiry letter to helping them to prepare and representing them at any meetings with the HMRC Inspector. The costs of handling such an Enquiry are covered in our fees, as detailed in the Terms of Engagement that we agree with all clients prior to working with them.
HMRC has been totally satisfied with the outcome of the Enquiries. Not one of the clients concerned has received a penalty notice from HMRC and all of them have benefited from a successful R&D Tax Credits claim.
The bottom line
If you are working with an R&D Tax Credits specialist your expenditure on research and development and the process used to calculate the allowable expenditure will be clearly stated within the R&D Tax Credits report submitted to HMRC.
Fiscale works closely with the specialist HMRC R&D Tax Credits units to ensure that the information submitted is accurate and prepared to their guidelines. If changes are required they are incorporated into the claim.
In the minority of cases where an Enquiry has occurred we have worked calmly and efficiently with HMRC to successfully resolve their issues or concerns – it is a collaborative approach.
HMRC tax Enquiries are quite simply one of the realities of being in business. The fear of an Enquiry should not hold your company back from submitting a claim for R&D Tax Credits.
With our 100% success rate, no win-no fee service arrangement and an average first claim value of £67,000 not raising your head above the parapet would be a costly mistake when it comes to contacting Fiscale about R&D Tax Credits.
Want to know more about R&D Tax Credits
To find out more about the R&D Tax Credit scheme and if your business activities are eligible please contact a member of the Fiscale South East team on 01634 959 063.