R&D tax credits HMRC Questions

How long does HMRC take to review a claim?

HMRC sets a 28-day target for SME research and development tax credit claims. However, the timespan for a review is dependent on a number of factors, including company size, account complexity, time of year, and the individual nature of your claim.

The primary factor is the size of your company, and whether it is classified as an SME, or a large company. 

SMEs can generally expect their R&D tax credit application to be reviewed and paid within 28 days, but you should always allow for delays. If your claim is made during national holidays, it can take longer. Peak periods for accounting - March, September and December - can also take longer. Other elements such as PAYE, VAT and corporate tax affairs are also accessed as part of the R&D tax credit claim, so complexity can lead to delays. It is therefore recommended to make your claim 6 to 8 weeks before you will need the money in your account, so that your innovation strategy is not impacted if there are delays.

R&D tax credit claims for large companies do take longer because these will form part of Corporate Tax returns which are more complex. The amount of time can vary massively from case to case. Therefore, it is best to discuss your individual case with an R&D tax credits expert who will be able to provide you with an estimate on the length of time the review of your claim will take.

What process will my application go through when it goes to HMRC?

Once F.Initiatives has submitted your claim for you, your filed claim will go to HMRC's own specialist R&D tax credit claim assessment unit where an inspector will review it in detail. If the R&D tax credit claim is clear and well prepared, then HMRC will often accept it quickly, meaning that you can receive your funds in a timely fashion (at any time from 2 to 8 weeks later depending on internal factors and workloads at HMRC). However, if the HMRC inspector identifies an error or issue or finds that the claim is missing necessary information, then they will ask questions to gather the necessary information. Naturally, this will slow down the process. In the vast majority of cases where further information needs to be provided or existing information clarified, the process is designed to reassure both the claimant and the HMRC inspector that the claim is correct and ready for processing. A full enquiry is only likely to occur if deliberate and significant fraud has occurred, which is rare. However, you should always make sure that your claim is well prepared to minimise the chances of this happening.

Where the claim has been submitted by an R&D advisor, the advisor will have ensured that the claim has already gone through a robust internal fact-checking and quality assurance procedure to minimise questions. The advisor will also be on hand to support with any further enquiry that might occur in order to get to the point of successful R&D tax credit payment.

If HMRC launches an R&D tax credit application enquiry, what will the outcome tend to be?

After your application has been submitted, HMRC may request further information from you. This is standard practice, and occurs in the vast majority of cases. A well thought out and well put together claim will typically pass HMRC inspection with few or no questions, and mean that you will receive your money once any questions are answered. However, if your application is found to contain discrepancies, HMRC may launch an enquiry into your claim. The major risk of the enquiry process is that your claim can be lessened or even rejected and - in some instances – financial penalties can be imposed.

If your application is subjected to an enquiry, it can suggest that any R&D tax credit application claims in future may require better record keeping. At F.Initiatives, our team of R&D tax credit professionals ensure that your application is thoroughly prepared and we submit it on your behalf to make the process as smooth and simple as possible.

How does F.Initiatives help to minimise enquiries from HMRC?

Although an enquiry doesn't necessarily mean that you won't receive the full amount of R&D tax credits that you have applied for, it can delay payment and lead to broader investigations. Additionally, most enquiries can be easily avoided with thorough preparation.

For these reasons, every claim that F.Initiatives submits on a client's behalf goes through a best-practice Quality Control and assurance process, which includes an initial review by our own in-house inspection team. This ensures that your claim is strongly prepared, accurate, unlikely to go to enquiry, and able to withstand an enquiry if it does occur.

Can HMRC withhold repayment of R&D tax credits?

Yes, they can – and will - do this until they are completely satisfied with every element of your claim, including the figures submitted, the technical narrative of your R&D projects and accompanying methodology. If HMRC has any queries about the way your claim has been prepared or its nature, they may make an enquiry and pause on repayment until they have satisfied themselves of your claim and reviewed the additional information you have been asked to provide. There can also be instances where an enquiry will be opened by HMRC after your R&D tax credit claim has been paid. In this case, there is a risk that you will have to repay a portion, or all, of this sum when the enquiry process has been concluded. If you seek the support of F Initiatives from the beginning of the process, we will help you put together a claim that is less likely to trigger an enquiry, either during the application phase or retrospectively.

Can HMRC charge a penalty if I submit an incorrect claim?

If an error is found in a research and development (R&D) tax credit claim, HMRC can charge a penalty. The size of the penalty will rest on how well the claim is deemed to have been prepared, and with what degree of due care and attention. If HMRC finds that reasonable care has been made with the claim, then any penalty may be nullified.

However, if HMRC finds that information was concealed intentionally or false information was knowingly given, then it can impose a penalty which equates to 100 percent of the lost tax. To reduce this penalty, the business must act fast to be forthcoming with requested information and cooperative. Companies may also be asked to rectify the underlying reason for claims errors, such as to better internal record-keeping with a review date set by HMRC. A sound methodology can instantly prove to HMRC that you have taken the necessary due care and attention with your claim. If HMRC raises any issues, it is advisable to suggest or agree to a meeting in person to discuss them - when you are responsive and open, the outcome tends to be better.

How should I supply my information to HMRC?

A R&D tax claim must be made alongside your CT600 or Corporation Tax return. HMRC doesn't define a standardised format for the supporting information you will provide to apply for R&D tax credits, but they do define the type of information they like to see to support a claim. This should include details of the R&D being carried out and its associated qualifying expenditure.

You'll need to enter the R&D tax incentive calculation onto your Corporation Tax return and provide documentation that supports the figures provided. This can include information about your R&D expenditure when categorised, details of the calculation methodology used for your research and development tax credit claim and the records used to prepare the calculation. Additional summary information of costs and a rationale for the definition of your qualifying project is also valued. Remember that this document is the business's opportunity to show HMRC that it has given sufficient care and attention to the preparation of its R&D tax credit claim.

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