Anyone who has recently submitted an R&D tax credit claim, or is about to embark on one, may have heard that the payment of these reliefs has just got a lot slower for many.
HMRC has paused the payment of a minority of claims while irregularities are investigated and, while most claims are unaffected, it is slowing the process down for everybody.
Legitimate claimants will likely experience a delay in receiving any payment due — but it’s not all bad.
This is just the latest front to open up in HMRC’s offensive designed to clamp down on rogue claimants. And while it’s frustrating not to receive money you are owed as quickly as usual, this is good news in the long run.
Businesses that are innovating are only properly rewarded if tax credits go to those truly breaking new ground. If companies who don’t deserve the relief are claiming and receiving significant sums, then it erodes the financial advantage which should only belong to those making genuine claims. This is why abuse of the scheme is damaging for legitimate claimants and needs to be rooted out.
HMRC wants businesses to make the most of the R&D tax relief scheme and feel the maximum benefit. But it has to be within the rules. Abuse threatens to undermine confidence in the good work of the vast majority of tax advisers and in the scheme itself. This could put off genuine innovators from claiming for the first time.
HMRC has estimated that £311m has been lost due to fraud and error in the last two years. It has hired new caseworkers to boost the amount of proactive compliance work it is able to do and this is now having an impact. It began warning of delays in mid-May.
The industry is, unfortunately, not regulated so these enquiries help to raise standards by holding those entering poor quality or fraudulent claims to account. HMRC’s stance should be welcomed by all businesses and advisers.
What does HMRC have to say…
“We have paused some Research & Development Tax Credit (RDTC) payments while we investigate an increase in irregular claims. Our investigations are continuing, but we are now able to provide an update.
To prevent abuse of the relief we will be enhancing our extensive compliance checks. These additional checks will mean our standard processing times will increase.
For the vast majority of claims, we will aim to either pay the payable tax credit within 40 days. It is our ambition to return to our standard 28-day processing times as soon as we can. Our gov.uk guidance will be updated shortly.“
HMRC carries out thousands of reviews a year into R&D claims, some cursory and others more lengthy. All companies should expect their claims to come under greater scrutiny every once in a while. When this happens, your Catax adviser will tell you what additional information is required and will deal with HMRC on the claimant’s behalf. The reports that accompany our claims are so extensive that it’s usually resolved to the claimant’s satisfaction although by their very nature they can take many months to conclude.
You can read more about how enquiries should be approached in our guide here.