In recent years, there has been an increase in the number of unsubstantiated R&D tax relief claims submitted by companies, prompting concern at HMRC in relation to the level of fraudulent claims being made.
HMRC’s response has been twofold.
Firstly, HMRC recently announced a pause in some Research & Development Tax Credit payments whilst they investigate irregular claims. This has led to significant delays in the payment of tax credits to clients, with HMRC failing to meet their target of 4-6 weeks.
Secondly, a number of key changes will come into effect from April 2023 in an attempt to ensure better accountability of the R&D claim process.
These changes include:
- Digital only claims – all claims will need to be made online, either using corporation tax software or using HMRC’s online portal;
- Comprehensive report for all claims – claims must be accompanied by a detailed report which explains how the company believes they meet the R&D criteria, what expenditure is included and how these costs were ascertained;
- Sign off by senior competent professional – proof will be required that the report has been approved and signed by the senior competent professional in the company who will be the first point of contact in the event of any enquiry;
- Data and cloud computing costs – these costs will now be eligible for relief following calls by tax professional bodies;
- Overseas R&D – R&D tax relief will no longer be available for R&D activity subcontracted to third parties who are located outside the UK. Externally provided workers will only be eligible for relief if they are paid via UK payroll.
At Kilsby Williams we have a robust claim system in place and our advisors submit a comprehensive report to HMRC with every claim. Furthermore, we work closely with key individuals in the business when preparing the claim and so it is always clear who the competent professional is.
If you are looking to make a future R&D claim, we would recommend the following:
- Maintain robust record-keeping which will assist with the drafting of the technical project descriptions;
- Review your cost heads across the business and assess whether you are capturing the more modern costs such as data and cloud computing;
- Ensure you have the right assistance with completing the claim to minimise the risk of HMRC enquiries.
Should you have any urgent queries on R&D Claims please contact Lucy Lloyd on 01633 653177 or by email – Lucy.Lloyd@kilsbywilliams.com