Most companies are now aware that HMRC can issue penalties when it comes to R&D Tax Credit claim submissions deemed non-compliant. 

Companies filing R&D Tax Credit claims may be unaware they are non-compliant. Which has resulted in HMRC increasing compliance checks and imposing penalties against some companies

What can cause an R&D Tax Credit Penalty charge?

3 general types of errors could result in HMRC issuing a penalty. These errors include but are not limited to the following:

• Lack of reasonable care;
• Deliberate; and
• Deliberate and concealed.

If a company has been penalised, they do have the opportunity to work with HMRC to correct the error and possibly reduce the penalty charge or eliminate it completely. Selecting the right R&D Tax Credit claim service provider can assist to prevent or resolve these issues.

Let’s take more of a look into what each of these errors mean:

• Lack of reasonable care
  • HMRC expects businesses of all sizes to keep records that allow them to give a reasonable representation as to what has been submitted. They also expect claimants with their R&D Tax Credit service provider or if preparing themselves, to follow up with HMRC to confirm the correctness.
• Deliberate
  • This is where a claimant has sent in their R&D Tax Credit claim intentionally knowing that the information is incorrect
• Deliberate and concealed
  • This is where the claimant has sent in the R&D Tax Credit claim with incorrect information and taken steps to hide the errors.

How is the R&D Tax Credit Penalty calculated?

The penalties are based on which error has been made when filing an R&D Tax Credit claim:

• Lack of reasonable care penalty can be between 0%-30% of the R&D Tax Credit claim benefit / tax due
• Deliberate penalty can be between 20%-70% of the R&D Tax Credit claim benefit / tax due
• Deliberate and concealed penalty can be between 30%-100% of the claim benefit / tax due

As mentioned above, the penalty may be reduced if a company works with HMRC to rectify the issues within the R&D Tax Credit claim. This is classed as prompted disclosure. So the more you help HMRC understand that you made a mistake and want to rectify it, the more the penalty could be reduced and possibly eliminated.

How can RDP help?

Genuine companies are feeling the strain of compliance checks when filing R&D Tax Credit claims.

RDP has a lot of experience when it comes to helping claimants with their compliance checks. Even when we have not prepared the R&D Tax Credit claim from the start.

We pride ourselves on making successful R&D Tax Credit claims. In many cases, we assist companies that submitted their own R&D Tax Credit claims and / or correcting claims that were prepared by another R&D Tax Credit service provider which did not include defending the claim.  We do this  by reviewing and responding to the existing HMRC enquiry by providing support to achieve successful resolution. So, if you have any questions regarding the R&D Tax Credit penalties, then please contact 0208 214 1341 or [email protected] to discuss further.

We also wrote a previous blog about HMRC’s 5 Questions Regarding Penalties.