R&D enquiries on the increase and how to avoid an amended R&D claim

Talk to our team

27 May 2022

R&D enquiries on the increase and how to avoid an amended R&D claim

Over the last few years there has been a policy shift from HMRC, with the previous light touch approach to R&D claims changing due to the rising number of claims being filed. HMRC are now employing 100 new compliance staff to undertake reviews and we expect to see an increase in enquiries, which can be costly and time consuming for those companies claiming.

HMRC has long been commenting on how the industry needs to self-regulate more and perhaps their announcement on the pause of some tax payments is part of their call to action.

Why might HMRC open an enquiry?

There are many reasons why HMRC open enquiries. These could be any of the following:

Your documentation/record keeping isn’t correct
Change in your circumstances
The type of work / project you’ve claimed for
Your claim value has increased dramatically
Inconsistency in your claim
HMRC are undertaking a check of your industry

R&D an unregulated industry

R&D Tax claims are pretty much an unregulated industry plagued by misleading claims and misrepresentation, with advisors who can walk away when an enquiry is raised.

Haines Watts R&D stand over all claims. As accountants and tax professionals we are regulated and adhere to the PCRT standards (Professional conduct in relation to taxation). It’s worth noting that not all advisors are accountants and are therefore not held to the same level of standards.

R&D burden of proof

The burden of proof lies with the claiming company, many advisors claim they can prepare claims in a few days without identifying and speaking with the competent professionals.

Minimise your chances of an amended claim

There is no guaranteed way to avoid an R&D tax relief enquiry, but our tips could minimise your likelihood of having a claim challenged or amended.

1. Get a trusted advisor

Using a quality advisor that will adhere to standards, employ R&D specialists and have robust processes will mean it’s less likely your claim will be amended.

2. Record keeping

Ensure your own record-keeping for any documentation relating to a claim is up to date and transparent. Ensure it shows costs associated with your R&D activities.

3. The right in-house person

Ensure the person in your company heading up the claim with your advisors is the person overseeing the project you’re claiming for as they will know the most about the process.

4. Clear methodology & reports

Good advisors will make their methodology clear and provide a technical report to demonstrate how guidelines apply to your claim when sending the claim to HMRC. This avoids inspectors having to come back and query these areas.

Why use Haines Watts R&D

Haines Watts R&D work with clients to develop their R&D strategy, with an emphasis on collating evidence of R&D activities and expenditure in real time, whilst educating clients and their workforce on the BEIS guidelines and tax legislation.

Haines Watts R&D are a team of qualified accountants and tax specialists have years of experience in dealing with HMRC. All new employees are taught from legislative first principles rather than merely undertaking software data entry.

Haines Watts internally run a National R&D Committee who constantly review legislation and develop policy standards on R&D best practice. These standards are formed from communication with HMRC and other likeminded accountants and R&D advisors. Which includes my representation on the RDCF Research and Development Consultative Committee - GOV.UK (www.gov.uk) and the committee's participation with HMRC on tax consultations.

Although the delay from HMRC may cause immediate problems, in the long term it is hoped this move will help eradicate the spurious claims being filed and remove those advisors who are taking advantage of this crucial incentive for companies who are truly undertaking Research and Development.