HMRC has paused the payment of some Research and Development (R&D) tax credits as it investigates irregular claims for relief and abuse of the tax credit system.

More robust reviews of R&D claims are now being carried out, and it is anticipated HMRC will continue to prioritise the scrutiny of this area moving forwards. Precise record keeping and a detailed technical narrative will help to reduce the chance of HMRC enquiring into the R&D claim.

According to statistics published on GOV.UK, the estimated number of R&D tax credit claims for the year ended March 2020 was 85,900, an increase of 16% from the previous year and primarily driven by a rise in the number of SME claims to 76,225. There has been concern in the industry that R&D advisers, who are not members of professional bodies such as the ICAEW or CIOT, are approaching SMEs and encouraging them to make claims when their activities do not necessarily meet the qualifying criteria.

This suspension will not impact all R&D tax credit claims, as HMRC state that the majority of claims are ‘genuine and will not be affected’, however there will still be delays to processing times.

Claimants are being asked by HMRC not to contact the R&D helpline or email to chase any unpaid claims. To ascertain the status of claims, agents and companies are requested to review their online account.

To ensure claims are processed as efficiently as possible, claimants are being reminded to complete all parts of the R&D section of the corporation tax return (CT600) including the CT600L. The submission of any supplementary information, including an R&D report, will also help claims to be processed in a timely manner.

It should also be noted that the HMRC online portal has been reporting submission errors, particularly where refunds are due. HMRC expects these issues to be resolved by 30 June 2022, however paper returns are currently being accepted.

Changes to R&D Claims from April 2023

R&D tax reliefs are to be reformed from April 2023 to support modern research methods by expanding qualifying expenditure to include cloud computing and data costs.

Other significant changes include the restriction of R&D tax relief to activities physically undertaken in the UK. UK companies that are currently claiming R&D costs paid to overseas groups or third parties located outside the UK will no longer be eligible for relief.

All R&D claims will need to be made online from April 2023, although exceptions will remain for those that are currently exempt from submitting their tax return online.

How M+A Partners can help

If you are considering making a claim for R&D tax relief, or would like to discuss the status of an existing claim, please get in touch with your usual M+A Partners contact or email