Reasons for Increased Enquiries into R&D Tax Claims

HMRC has been closely scrutinising R&D tax claims in recent years. Consequently many claims now face challenges and rejections.  This increased focus has led to more detailed examinations by HMRC. 

Reasons for increased enquiries into R&D tax claims

Previously HMRC, operated a 'process now, check later' policy for R&D tax claims. This expedited relief for businesses. This hands off approach was exacerbated during Covid 19 when HMRC conducted few or no enquiries.  

A parliamentary report highlighted a rise in erroneous and fraudulent R&D tax claims submitted to HMRC during this period. During the 2021/22 period HMRC estimated the cost of such bogus and incorrect claims at £469 million. These claims related principally to the SME scheme.

The report predicts the annual cost of the R&D tax schemes will rise from £6.5 billion to £9.2 billion by 2027/28. Additionally public expenditure soared during Covid 19 and needs to be addressed. As a result, HMRC is focusing on R&D tax claims which are increasingly costly for the government and prone to fraud.

It's therefore not surprising that HMRC are clamping down on a policy which will prove to be increasingly expensive for the public coffers. Additionally, it has also been subject to a rise in fraudulent activity.

HMRC's approach to enquiries

Your company's previously accepted R&D tax claims may still face future HMRC enquiries. HMRC tends open enquiries for several reasons:

Our institute has noted inconsistent approaches within HMRC departments. Valid claims sometimes face rejections! However, don't let this deter you from submitting R&D tax claims.  

For example HMRC may initially reject a software development claim requiring a more detailed explanation to support the qualifying criteria. 

Reducing the chances of an HMRC enquiry

For first time claims, obtaining an advance assurance from HMRC is crucial. This step helps resolve issues at an early stage and clarifies your R&D project's nature. 

Additionally, HMRC's new approach to claims aims to reduce a rejection at a later stage and withdrawal of relief.

For more useful information, check out our Ebooks here.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].

Alternatively, please feel free to complete our Business Questionnaire here.

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