R&D Tax Credits: Penalties and Fines

If you make mistakes on your R&D Tax Relief claim, HMRC may issue you a fine. You could face further penalties if it believes you deliberately misled them.

What’s the worst HMRC can do? Can you just say “oops” and withdraw or refile your claim? Sadly, it’s not so straightforward.

HMRC can and does impose fines and financial penalties on companies that submit inaccurate or fraudulent R&D Tax Credits claims.

How much they fine you depends on whether they judge you’ve made an honest mistake, or that you deliberately tried to deceive them.

Can I be fined?

In a word? Yes. 

HMRC can fine you if you’ve made errors, deliberately or accidentally, on your R&D Tax Credits claim. 

They can also administer fines retrospectively, up to seven years after the claim in question has been submitted. 

That’s if they decide to go through your previous filings, find anything out of line, and launch a compliance check.

It’s surprisingly easy to make mistakes on your R&D Tax Credits application. The most common mistake companies make – or accountants acting on their behalf – is filing for ineligible expenses.

Most of the time, this won’t be your fault. 

HMRC doesn’t make it easy to figure out which costs are eligible and how much you should claim. 

To make life a little easier, we’ve put together this comprehensive guide to determining which of your costs qualify for tax credits and how to calculate how much you should claim for.

How much could I be fined?

It varies. 

HMRC can impose different levels of fines, up to the total amount of R&D Tax Credits you claimed for in your tax return. 

That’s on top of HMRC taking back the tax credits they granted you in the first place. 

If you’ve received £100,000 of R&D Tax Credits, you could be facing a combined repayment and fine as high as £200,000. 

So if you’re found guilty of filing inaccurate claims over several years, you could be facing a pretty hefty bill.

That being said, you might not be fined at all if HMRC deems the errors in your application were accidental. 

Still, they’ll almost certainly ask for some or all of the R&D Tax Credits you’ve been given to be returned, which could be a massive financial blow, particularly if you’ve already invested the money in your business.

That's not all

Fines aren’t the only thing you should be worried about. 

In addition to monetary penalties, submitting an inaccurate claim could damage your company’s standing within HMRC.

This could attract more scrutiny to your claims and increase the chance of an enquiry into your future filings. 

It could even lead to a full enquiry into your accounts as a whole. 

So it could take much longer for you to receive your R&D Tax Credits repayment, and other kinds of government support, or in some cases lead to additional controls from HMRC.

How can I avoid fines?

The way to avoid a fine is to make sure your tax credits application is fully compliant. Something that’s gotten much harder now that HMRC is asking for far more information about your development work

The best way to ensure your claim is compliant is to work with an R&D Tax Credits specialist like GrantTree. 

We make sure your application is fully compliant with the latest tax credits guidance and is complemented with an airtight technical narrative that justifies every penny you’re claiming for.

Let GrantTree protect your reputation

If you have any questions about your claim or are worried about attracting fines and other penalties by making a mistake on your claim, GrantTree’s highly experienced team of R&D Tax experts is here to help.

We’ll make sure your claim is 100% compliant by only including projects and costs that satisfy the government’s complex definition of qualifying R&D.

Our team of tax credits experts would be happy to help.