R&D Tax Relief mistakes you wouldn’t expect from a Top 20 firm of accountants!
So, I’ve just finished a project for a new client. They have recently switched accountants, the new one referred them to Cooden Tax Consulting, but the old one had submitted a claim for R&D Tax Relief for the client that didn’t have one element of accuracy in it!
It was only a small claim so they probably weren’t that bothered, but they are a top 20 firm so I would expect a little more knowledge. The section of the letter they wrote to the client that covered the claim is below:
A claim has been made for enhanced tax relief for research and development tax relief on the costs of the work subcontracted out to ABCDEF University. The uplift on cost for subcontracted work is only 30% compared to 125%. Furthermore, the government grant funding is netted off against the eligible expenditure.
So, in my opinion here are the inaccuracies:
1 – A government grant linked to R&D does mean that some or potentially all of the claim for R&D Tax Relief would be under the old large scheme or RDEC, however in this case the grant was from UK Trade and Industry to help the company develop its export potential. Therefore, the company could claim under the SME scheme.
2 – Even if the government grant had been in support of the company’s R&D it does not need to be netted off the actual expenditure, the full cost should have been included in the claim.
3 – The uplift for sub contracted R&D, where you pay someone else to assist with some technical elements of the R&D, is not limited to 30% under the old large scheme, it can be included in a claim under the SME scheme for 125% uplift (now 130% uplift), however the company will only be able to claim 65% of the cost from the subcontractor.
If you’ve been working with an accountant for an R&D Tax Relief claim and you think they might have made similar errors in calculating your claim, you still have until the second anniversary of the end of the tax accounting period, which is normally your company’s year-end to amend the claim.