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Will HMRC Penalise Incorrect R&D Tax Credit Claims?

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It takes a considerable amount of time to compile a strong R&D tax credit claim, but what happens if HMRC identifies an error? In this article, discover whether HMRC will issue penalties for incorrect R&D claims. 

Will you receive a penalty for incorrect R&D claims?

If an error is identified in your R&D tax credit claim, it’s possible you may be issued a penalty. HMRC introduced this penalty system to make sure that all tax returns are prepared thoroughly and with responsible consideration.  

If HMRC amends part of your tax return to correct an error, and as a result you owe more tax or need to repay a credit, then HMRC could issue a penalty if they believe you are at fault. Learn more about their enquiry process and Ayming’s HMRC Enquiry Support service here.

What penalties you could receive

This depends on the severity of the error. If HMRC’s enquiry finds that you’ve completed your claim incorrectly deliberately, or shows you didn’t handle your claim with care – you could be fined up to 100% of the tax loss to the exchequer. If HMRC identifies a genuine mistake and can see that your company took reasonable care when compiling a R&D claim, they can charge a penalty of ‘nil’.

If you’re quick to respond and rectify any problems that HMRC has identified, and supply any extra information they need, HMRC can choose to reduce your fine. They will also postpone the penalty while you carry out investigations or correct any errors in your claim. 

How to avoid these penalties 

The main way to avoid an enquiry with HMRC and any subsequent penalties is to ensure you provide a solid R&D claim with supporting documentation and records. This demonstrates to HMRC that you have a sound process and you are diligent in completing your R&D claims. 

If HMRC identifies a problem, it’s important to be cooperative. Setting up a meeting with HMRC will show you’re keen to rectify these issues and they’re more likely to reduce your penalty as a result. 

How Ayming can help

Ayming’s consultants are experts in R&D tax credits. We’ll help identify all of your qualifying expenditure and compile a strong and robust R&D claim. 

We have an excellent working relationship with HMRC, so we are fully equipped to guide you through the entire R&D tax credit process. 

Speak to our experts today to kickstart your claim.