R&D Tax Credits: Penalties and Fines
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R&D Tax Credits: Penalties and Fines

What’s the worst HMRC can do? Can you just say “oops” and withdraw or refile your claim? 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?

Simply: 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 you’ve submitted your claim. 

That’s if they decide to go through your previous filings, find anything out of line, and launch a formal HMRC Compliance Check.

Key Resource: The Ultimate Guide to HMRC Enquiries. What they are, how they work, and how to avoid them.

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.

Also, in our experience, HMRC regularly approves ineligible claims, mostly because it lacks the resources needed to review every single application thoroughly. 

Having ineligible claims approved year after year gives companies and advisors a false sense of what does and doesn’t qualify for R&D Tax Credits. 

In rare and extreme cases, you might be filing an ineligible claim and not even realise. 

That is until you’re forced to hand back years worth of tax credits that you’ve already spent!

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. 

That’s 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 and reputation 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 accurate. 

And the best way to do that is to work with an R&D Tax Credits consultant 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.

Get in touch

If you have any questions about your claim or are worried you could be facing a fine, feel free to drop us a line. 

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