Tax Computation and Tax Returns amendment fees
Historically, some R&D Tax providers used to submit R&D claims for their clients by just sending a letter to HMRC. The letter (or email) detailed the qualifying expenditure claimed, and the amount of relief to which the company was entitled too. It was left to HMRC to amend the company’s corporation tax return and issue any cash or tax repayment due to the claimant company. This was taking too much resource from the HMRC R&D tax inspectors (who were already stretched with capacity) and introduced inconsistencies in tax computations for businesses between one year and another.
As of 1 April 2019, this is no longer possible.
Instead, companies and/or their R&D tax providers must submit an amended CT600 and corporation tax return with the R&D tax claim. Failure to do so will result in the claim being returned. If a revised claim with the correct documentation is not submitted within the statutory two year deadline from the end of the company’s accounting period, the company will lose the ability to claim any R&D Tax Relief.
Businesses need to ensure, when selecting an R&D tax provider, that they have the ability to amend and submit tax computations and returns. Should they not have the capability, the business will probably incur additional fees from their tax advisors for making the necessary tax return amendments.
Corrections to Tax Computations and Tax Returns
Additional fees may also arise by having R&D Tax providers that are not members of the ICAEW or regulated by the FRC. Incorrect tax returns and tax computations done by such third parties may result in additional fees that need to be paid to tax advisors for rectifying mistakes.
Moreover, the actual fee may be the least of such businesses concern! An incomplete picture and understanding of the tax rules may have an impact on the amount of cash credit a business may receive, the impact on any group relief available, the adjustments required to any capitalised costs and even existing transfer pricing agreements.
Does your fee cover you for any R&D Tax Enquires?
The fees for dealing with an enquiry can be very costly. It is vital to clarify when agreeing on a fee with an R&D Tax provider whether enquiry cover is included. Not having enquiry cover may open the business to providers who may include costs that are not allowable. This would then result in the business paying a larger fee (if the fee was calculated on a percentage basis). If HMRC spots these costs and asks further questions, a fee again is charged for dealing with the enquiry.
Including everything that is allowable as an R&D Qualifying Project and Expenditure
A business that does not use an R&D Tax provider that employee sufficient engineers and/or technologists may end up having to pay an additional fee (usually at a higher percentage) for any additional projects and costs that may have not been identified by the R&D Tax provider.
The cost to the businesses for all the points above is not only monetary, but sucks in resource from internal staff (both in the finance team and technology teams) as well as significant delays in any R&D Tax Credits being issued back to the business.
For more information contact Carrie Rutland.