The importance of using your accountant to do your R&D claim
Accountants are warning that UK companies are at risk of falling foul to new regulation for the submission of tax relief claims for research and development (R&D).
Nearly 50% of claims have been declared invalid by HMRC since new documentation requirements came into effect in August 2023.
Companies that have not complied with the new forms and requirements will begin receiving letters from HMRC saying their R&D claim is invalid, as the claims have been submitted without the required additional information form (AIF).
The AIF is required for claims for both SME R&D tax relief and the R&D expenditure credit (RDEC).
Innovative companies will start to feel the bite from some of the previously announced compliance changes to the R&D tax relief claims, with allowed spending from the beginning of April 2023 having been reduced, and many SMEs who are having their company year end accounts prepared for financial periods which run beyond that date will now start to feel the impacts of the reductions.
In the 2020-21 tax year alone, there were 89,300 R&D claims made in the UK, an increase of 7% from the previous year – driven largely by SMEs, with the new administrative regulations designed to weed out erroneous and fraudulent R&D claims.
Any companies that have not complied with the new forms will soon begin hearing from HMRC saying their claim is invalid unless they amend their returns. This may be do-able for some but for those who have left it all to the last minute it could mean their claim is lost forever.’
As part of its campaign to identify malpractice, HMRC stated that from August, businesses submitting R&D tax relief claims needed to provide much more information than previously.
HMRC investigations into R&D tax relief error and fraud have significantly increased, particularly over the last couple of years, to combat a boom in unregulated R&D tax consultancies.
As accountants, we would always suggest that the claim is made by your accountant, not an outside agency / consultant, while they are preparing your company accounts.
The overall level of error and fraud for both R&D tax relief schemes across all sectors of the economy was estimated to be £1.13bn for 2020-21. That is equivalent to 16.7% of claims, significantly higher than HMRC’s previously published estimate of 3.6%.
The latest figures from the Office for National Statistics (ONS) show that expenditure on R&D that was performed in the UK at current prices was £61.8bn in 2020, an increase of £2.1bn since 2019.
If you believe that you are undertaking R&D and would like to make a claim, please get in touch with us here at Kennedys Accounting, we would be pleased to get one of our experienced team to help.