What is an Enquiry?
When you submit a research and development tax credit, the HMRC may need you to provide additional information to support your claim. This process is formally known as an HMRC enquiry, and the outcomes may vary depending on the level of detail and support you have for your claim.
Every single R&D tax credit that is submitted is reviewed by the HMRC. That is why it is so important that the submission has enough support and is well-presented. Often a desktop review of the paperwork submitted is enough, but there are instances where they need further clarification before they move forward with a decision.
The inspector will decide when more information is needed, and if your claim falls into this category an enquiry process will start.
If you did everything right, your claim should be able to withstand the scrutiny – you will get your funds as soon as all of their questions have been answered. When they find inaccuracies or discrepancies, though, you risk facing penalties or a reduced payout.
An enquiry can also highlight areas that require improvements for future claims, such as record-keeping processes.
The Implications of an Enquiry
So, what does it mean when your R&D tax credit enters the enquiry process?
The first thing you should note is that it is likely that your tax repayment is going to face some delays. Although enquiries can occur after the claim is processed, it is less common for that to happen.
An inspector will initially reach out to you in writing, either by email or letter. Their goal is to understand the costs associated with the research and development, so they will also want to meet with those who helped to submit the claim.
Don’t be alarmed if this happens. When you work with professionals to prepare your claim, they will manage the enquiry on your behalf and ensure that it is resolved appropriately.
Outcomes of Strong Claims
Strong evidence to support your claims, and appropriate documentation, will make the enquiry process go smoothly. Well-prepared claims will be able to answer all of the inspector's questions, and when they are satisfied, the enquiry will be closed.
At this point, they will process the R&D tax credit and repayment. You will likely receive the payment in full, but if there an agreement is not reached it may be settled by negotiation.
Outcomes of Weak Claims
Errors or lack of support for your claim may cause the inspector to reduce the value of your repayment. If deemed necessary, you could also face a penalty due to negligence or carelessness.
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