HMRC has been using its powers to correct company tax returns under FA 1998 Sch 18 para 16 to remove claims for R&D tax relief where it considers, based on information available, those claims to be incorrect, reports the CIOT.
Tom Wallace, director of tax investigations at WTT Consulting Ltd, said: ‘HMRC have not been clear on what information they will use to reach this decision, the level the decision will be made at, or if any discussion will be had with the company or their advisers before such a step is taken. Certainly, up until now, it would appear the decision is being made unilaterally, and that very little information is being provided on the reason why such a step has been taken. HMRC have, however, acknowledged that the letter advising that the claim has been removed has been lacking, and they will be updating these to include more information on why they believe the claim is incorrect.’
Wallace added: ‘Thankfully, the officer’s decision is not final, and the taxpayer can reinstate the claim by amending its tax return. This must be done within the normal window to amend the return, or within three months of the correction notice if the window has closed (although this would need to be done by rejecting the correction in writing). This will most likely trigger a formal enquiry in which the claim can be augmented with further information and correctly tested by the officer.’
HMRC’s correction of returns using their para 16 powers pre-dates the 8 August 2023 additional information form (AIF) that must be included with any new R&D claims. HMRC says that a company intending to reject a correction to its corporate tax return, where the claim was originally made before 8 August, will not be required to submit an AIF.
The CIOT has separately reported that almost half of R&D claims received by HMRC after 8 August 2023 have not included the new AIF. HMRC is contacting companies and their agents in cases where claims have been submitted without the AIF, advising that the claims are invalid and will be removed from the relevant company tax return.
If companies/agents are within the time limit (broadly, the anniversary of the tax return filing deadline), they can amend the return to add back the R&D claim and complete the AIF. The CIOT understands that subsequent completion of the AIF, along with a valid company tax return, would lead to the claim being accepted by HMRC. HMRC has published examples of the letters it is sending to companies and to agents.
HMRC has been using its powers to correct company tax returns under FA 1998 Sch 18 para 16 to remove claims for R&D tax relief where it considers, based on information available, those claims to be incorrect, reports the CIOT.
Tom Wallace, director of tax investigations at WTT Consulting Ltd, said: ‘HMRC have not been clear on what information they will use to reach this decision, the level the decision will be made at, or if any discussion will be had with the company or their advisers before such a step is taken. Certainly, up until now, it would appear the decision is being made unilaterally, and that very little information is being provided on the reason why such a step has been taken. HMRC have, however, acknowledged that the letter advising that the claim has been removed has been lacking, and they will be updating these to include more information on why they believe the claim is incorrect.’
Wallace added: ‘Thankfully, the officer’s decision is not final, and the taxpayer can reinstate the claim by amending its tax return. This must be done within the normal window to amend the return, or within three months of the correction notice if the window has closed (although this would need to be done by rejecting the correction in writing). This will most likely trigger a formal enquiry in which the claim can be augmented with further information and correctly tested by the officer.’
HMRC’s correction of returns using their para 16 powers pre-dates the 8 August 2023 additional information form (AIF) that must be included with any new R&D claims. HMRC says that a company intending to reject a correction to its corporate tax return, where the claim was originally made before 8 August, will not be required to submit an AIF.
The CIOT has separately reported that almost half of R&D claims received by HMRC after 8 August 2023 have not included the new AIF. HMRC is contacting companies and their agents in cases where claims have been submitted without the AIF, advising that the claims are invalid and will be removed from the relevant company tax return.
If companies/agents are within the time limit (broadly, the anniversary of the tax return filing deadline), they can amend the return to add back the R&D claim and complete the AIF. The CIOT understands that subsequent completion of the AIF, along with a valid company tax return, would lead to the claim being accepted by HMRC. HMRC has published examples of the letters it is sending to companies and to agents.
