It is possible for HMRC to fine you for errors when you claim. The nature of the penalty will depend on whether HMRC deems the inaccuracy to have been intentional or not. That will be decided after HMRC launch an enquiry into your claims, in which you will be asked to justify your current and previous claim reports.
If HMRC determines that your claim was intentionally inaccurate, then you can be fined up to the full value of the R&D tax credit. If, for example, you claimed £150,000 of credit and this was paid out in full, then you could find yourself with a £300,000 bill, as HMRC will request the credit be paid back, as well as adding the penalty on top.
If the inaccuracy was unintentional then HMRC will require you to pay back the amount that you’ve overclaimed for. This may not sound too serious, but it can be significant if you’ve overclaimed in multiple claims and have since invested the funds.
Due to the volume of claims being processed by HMRC, not every claim is given the same amount of scrutiny. For that reason, HMRC stipulates that it can retrospectively apply penalties to claims made up to 7 years prior. As a result, you may receive the full amount of R&D credit you claimed for, only for it to be retracted later.
So if you’re required to repay multiple years claims after they’ve been reinvested into the business this could have a serious impact on your financial health.
If HMRC have a suspicion that there have been mistakes in your claims they will, of course, delay the payout of any R&D credit while your claim is being investigated. Beyond that, HMRC may also investigate other aspects of your tax and accounting such as your VAT claims. These enquiries can last several months and could therefore delay all forms of subsidization or rebate you are expecting from HMRC.
For that reason, we only recommend that businesses self-file their claims if they’ve spent less than £50,000 on R&D and they have experience filing R&D claims in the past. The potential for a mishap in your R&D claim to affect other aspects of your business is not worth taking the risk on.
For any claim with more than £50,000 of R&D expenditure we recommend engaging with a specialist advisor. At EmpowerRD we employ industry-leading advisors (such as ex-HMRC inspectors) combined with an intelligent online platform that significantly speeds up the process of making an R&D claim. Get in touch with one of our team to understand if you can claim, and learn more about how EmpowerRD has improved the process of applying.