Research & Development (R&D) Claims - Common Errors

Following a number of “dodgy” R&D claims which have resulted in companies having their claims for relief refused or restricted, HMRC have issued the following guidance on common errors:

Some of the common errors made in R&D tax relief claims include:

• Project activities outside the scope of R&D for tax purposes are included in the claim.
• Expenditure outside the qualifying categories is claimed
• Staffing costs are claimed in respect of people who are not employees of the company (however, consider whether the expenditure qualifies as expenditure on externally provided workers).
• Claims are made in respect of overheads that do not qualify as consumable items or consumable stores.
• Expenditure is claimed on a particular item for a period before it was in a qualifying category.
• Special rules for connected parties are not applied.
• Companies do not recognise they are not SMEs.

For the SME scheme only:

• A loss previously surrendered for a payable tax credit is carried forward.
• Unconnected subcontractor expenses are not restricted to 65%.
• A payable tax credit claim is made for expenditure that only qualifies under the large company scheme.
• No account is taken of subsidies or Notified State Aid.

If you need assistance with R&D claims please contact us.