How would you know? What can you do about it? You could start by speaking with a specialist and even better someone who’s worked in a Top 5 CRO preparing claims for 6 years!
Now I am not saying that every accountant that files an R&D Tax Relief claim for their clients is bad, far from it, but as a qualified ACCA accountant, who has made R&D Tax Relief his niche, I feel I am reasonably qualified to call out the profession for its blunders in this area.
We have recently completed a claim for a startup medical device company. Their accountant had filed a claim for them, having told them he knew what he was doing, but somehow, he actually ended up making them pay more tax than they would have had to had they not “claimed”.
This was by far and away the worst case of an accountant making an error in the preparation of a claim that we have seen, and we have seen a few. Somehow the accountant had managed to add back the enhanced R&D Tax Relief costs to the taxable profit, rather than deducting them.
Whilst there was an error, the accountant does need to be congratulated for bringing up R&D Tax Relief in a conversation with their client, because, even 18 years after it’s introduction, a lot of accountants still don’t discuss this with their clients.
The good news is if you think your accountant has made an error then you have until the second anniversary of the end of the tax period to correct that error.
It should also be pointed out that sometimes we do actually recommend reducing the value of a claim because a cost has been incorrectly interpreted or a claim has been made for under the wrong scheme.
What are the common errors that we see in claims?
Staff costs
- Incorrect or unreasonable apportionments of R&D made for members of staff
- Staff costs claimed exceed the actual salary cost
- Reimbursed out of pocket travel expenses on R&D activity have not been included
- ERs NI and ERs pension contributions have not been included
- Inconsistencies with the application of the Employers NI allowance
Subcontractors and Externally Provided Workers
- Costs incorrectly allocated
- 65% apportionment not properly made
- Connected subcontractors or staff providers incorrectly valued
- Overseas subcontractors not included or incorrectly included
Material Costs
- Sometimes incorrectly treated as a subcontractor cost and vice versa
Claiming under the wrong scheme
- Grant funding has been incorrectly reported and claims have been made under the SME Scheme when they should have been claimed under RDEC and under the RDEC scheme when some could have been claimed under the SME Scheme
- Working as Subcontractor for a Large Company has been incorrectly assessed when the nature of the contract is actually not one of Subcontracting
Grant Funding
- Any costs covered by the grant qualify for RDEC, you don’t have to deduct the value of the grant from the costs incurred.
- Not all grants have an effect on your eligibility to claim R&D Tax Relief under the SME Scheme
Some other things can be corrected but some can’t
If you made a loss and decided to carry that loss forward, you can, within the second anniversary time frame, elect to surrender that loss for a 14.5% tax credit, what you can’t do is elect to surrender the loss for the 14.5% tax credit and then change your mind and carry the loss forward, the surrender is irrevocable.
In summary, whatever you have or haven’t done in relation to your R&D Tax Relief claim you always have until the second anniversary of the end of the tax period to make a change, whether that is a new claim or amending an existing one.
We can help you if you think there is a mistake with a claim with a proofreading and claim review service. If you’d like to know more about these or our full blown R&D Tax Relief claim service, why not contact Simon on 01424 225345 or e-mail info@coodentaxconsulting.co.uk to start the process.
Remember we have a very strong clinical research/biotech background to the team!
