With the number of R&D claim submissions increasing year over year and even more so with the pandemic, HMRC has hired over 100 new staff to deal with the number of R&D claims that have yet to be processed. Late last year, HMRC advised that they had averted large fraudulent claim submissions so much so 3 individuals were jailed (Fraudulent R&D Claim Submission and Claimants Jailed, Eyeopener for All Claimants)
As the R&D programme continues to evolve and HMRC policies continue to adapt, I would ask you to consider “what questions should you expect if HMRC decides to review your R&D claim?” If you have completed and submitted your R&D claim the correct way, it is more likely than not that your enquiry process would proceed rather smoothly. However, if you have been advised incorrectly and / or a sub-standard R&D claim has been submitted, HMRC more likely than not may ask the following:
- What process was undertaken to qualify eligible R&D activities?
- Do you have contemporaneous documentation to support your R&D claim?
- What was the methodology utilised to capture R&D expenditures?
While these questions are general in nature, HMRC may get into specifics on the technical side of your R&D claim, such as asking start and end dates of projects, milestones achieved for each R&D project a claimant has deemed eligible and were the R&D activities carried out by competent professionals in their field.
Other questions posed by HMRC may involve documentation requests, such as contracts or statement of works you may have with claiming third parties or externally provided workers. Questions pertaining to associated risk and intellectual property are also other areas that could be broached to ensure you have the rights to claim these types of R&D expenditures.
Finally, there are several methodologies to capture and calculate your R&D claim. The likely question to be asked, “what was your methodology?” If your response is only “a percentage of time” without any reasoning and / or an actual methodology, penalties could result from the R&D claim submission.
The questions posed above are just a few that HMRC may ask and in addition, they have the right to carry out an on-site analysis at your company.
Do not put yourself in a situation where you hire an R&D service provider that is asking you to jointly determine R&D eligibility. This is where an HMRC enquiry could take a turn for the worst and end up taking a lot of your time instead of obtaining your R&D tax benefits in an efficient and timely manner.
You need a service provider, such as RDP Associates (RDP), that knows how to answer these questions and advise the right way to go about generating a “bullet-proof” R&D claim.
At RDP, our plan and process are simple. You focus on your company while we focus on your R&D claim.
Contact us to find out more as to we go about our claim process as well as our success stories when it comes to HMRC enquires.