Does a processed R&D relief claim mean it’s successful?

Many companies breathe a sigh of relief when HMRC confirms that an R&D tax claim has been processed. The email or letter arrives, the claim is logged and the assumption is that the matter is settled.

The problem is that processing on its own is not a guarantee that the claim is safe and successful, as it does not equate to an approval.

Why processing is not the finish line

The processing of an R&D tax credit claim only confirms that HMRC has received the figures and that the claim has passed through an automated system. It does not confirm that the claim meets the detailed rules of the scheme.

HMRC reviews claims at different stages, as they typically have up to 12 months after the filing date to open an enquiry into a company’s tax return, including the R&D tax claim, although this extends to 15 months for an amended return.

Many people are often shocked when a claim that has seemingly been approved to the point they have already received the relief is later revisited and determined unsuccessful.

A claim is only genuinely successful when it can withstand those later checks.

• The project must seek science or technology advancement
• The project write-up must show a genuine technical challenge.
• The costs must meet the qualifying criteria.
• The narrative must make sense to an HMRC inspector who has never seen the project before.

Weakness in any one area can lead to reductions, repayment or penalties.

The risk is higher now because HMRC is taking a closer look at claims across the board. Many older claims that went through without comment are now being re-examined.

How to reduce the chance of an unsuccessful R&D tax claim

Companies can protect themselves by preparing their claims with the expectation that HMRC might return to them later.

Clear records of staff time, project development notes throughout the year, completion of all supporting filings (including the Additional Information Form and Advanced Notification Form), a well-written technical narrative and supporting evidence can be the difference between whether or not your claim stands up to scrutiny.

A claim built on well-documented work is far more resilient than one built on inaccurate data or vague descriptions.

If you are in need of a second opinion or assistance making an R&D tax claim for your business or client, our team of R&D tax consultants are happy to assist you.

Much of our work comes from helping companies whose previous claims were rejected by HMRC after being prepared by other advisers.

While the industry sees HMRC enquiries in roughly one-fifth of all R&D tax credit claims, only around three per cent of the claims prepared by us receive that level of attention.

When an enquiry does arise for our clients, we handle the process as part of our enquiry defence service.

Need help with preparing R&D tax claims that stand up to scrutiny? Get in touch today!

Adam Bointon