FOCUS ON ACCOUNTANCY: R&D tax credit claims under closer scrutiny

Research and development (R&D) tax credits are intended to incentivise investment in innovation, and we have helped many businesses in Dorset to access this support.

HM Revenue & Customs (HMRC) has recently ramped up its audit activity and, like other firms, we have received more R&D enquiries in the last three months alone than in the last decade. Currently most of these enquiries relate to claims with qualifying expenditure of under £50,000, though we anticipate attention will eventually turn to larger claims.

The challenge for HMRC is that promoters of dubious claims continue to play an active role in the marketplace. Chamber members should therefore undertake due diligence on any prospective adviser in this area before proceeding.

From April 2023, there will be significant changes to the rates within the R&D regime. Companies making claims should ensure they factor these changing rates into any longer term forecasting exercise so there are no nasty surprises.

The Treasury is currently consulting on simplifying R&D tax reliefs by merging the existing schemes for small and medium-sized enterprises and large businesses. It is also considering whether to introduce different levels of tax relief based on industry sectors. If implemented, the new scheme is expected to be in place from April 2024.

We strongly recommend that businesses considering making R&D claims ensure their submissions are carefully thought through, with a suitable amount of disclosure. Claims with little or no supporting information are now almost certain to be picked for HMRC audit, even if the sums of tax involved appear to be low.

We would be pleased to help any chamber members considering R&D tax credit claims.

Lisa Whitbread

Tax director, PKF Francis Clark

01202 663669

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