If HMRC identifies an error in your claim for research and development (R&D) tax credits, they do have the right to charge a penalty based upon tax loss to the Exchequer.
HMRC can give a penalty which is as much as 100% of the tax lost, so if you had a claim for £100k tax credits you could be made to pay this back with an additional £100k as a penalty.
The penalty decision is based on a few factors; whether or not they think you’ve taken reasonable care in calculating the numbers (accidental or deliberate), how accurate the technical narrative is, how responsive and accessible you are to providing information they’ve requested, and simply your demeanour in helping resolve any errors.
If you are cooperative and can show errors were from a reasonable interpretation of the guidelines then you may simply be asked to take out this cost and not receive any penalty. HMRC can review previous years’ claims and can also elect to audit other accounting elements of the company so you want to make sure you’re filing properly and accurately.
HMRC wants you to file a properly prepared R&D claim. It’s important to make sure that your R&D tax credit claim is accurate end to end, from the accounting numbers, to the costs claimed for research and development, to the technical description and of course the calculation and classification of R&D costs.If your claim falls short on either numbers or what you write, your claim could be rejected, reduced or possibly attract a penalty in some cases.
R&D consultants can help you avoid these issues and guide you through the process of filing R&D tax credits claims with our 100% success record.