HMRC R&D Tax Credit Enquiries
It is a normal part of the HMRC risk assessment process to investigate claims where there is a risk that the claim has not been compiled correctly, and additionally in carrying out random checks. Additionally, a claim is checked for arithmetical errors and may be benchmarked against the norm for the industry.
Red flags will typically be raised though on claims where insufficient information has been supplied as part of the claim such that the ORC (Officer of Revenue and Customs), i.e. the inspector , looking at the claim is unable to determine if the claim is valid either in part or as a whole.
Alternatively, too much information may have been provided, but of the wrong type, namely highlighting the innovative features and benefits of a product without identifying exactly how the project meets the qualifying criteria.
Finally there is the question of the qualifying costs, and consideration of whether all the costs claimed are in fact allowable, and how they link back to the project's eligiblility. If only part of a project is eligible, then careful consideration needs to be given to how only the costs relating to that eligible part are claimed.
Once the ORC has decided they are going to enquire into a claim, it is critical that the response to them from the outset is managed carefully and in a way which emphasises the eligible R&D that has been carried out. It is not uncommon to see companies at this stage provide information back to HMRC in response to a letter that actually makes their position worse. The ORC may ask for a meeting with the key technical staff at the company. The outcome of this meeting will determine the future of your claim and it is important to consider who will attend it, how much involvement they have had with preparing the claim and to ensure they are fully briefed.
We can provide full advice on how to respond to HMRC, assisting with drafting responses, evaluating the submitted claim, and training your staff for any HMRC meetings that maximises the potential for your R&D claim to be accepted.
