UK Tax Papers and Forms from HM Revenue Customs under a glass

3 Outcomes Following Fraud Investigation Services

Within the process of R&D compliance, there are a range of different ways HMRC investigates the tax claim submissions. Predominantly this is through enquiry letters, in which a compliance check is opened, however during this process there is a secondary check known as the Fraud Investigation Service (FIS). While an FIS is raised on a claim, everything is put on hold until this check is completed, which can delay a claim further or potentially result in the closure of a submission.

Some providers within the R&D world are noting a 400% rise in FIS checks, which while high, is not the first time we have seen HMRC increasing their investigation numbers. Hundreds of new employees have been brought in over the years for R&D compliance, and in previous years certain sectors had been brought into the spotlight through this process.

HMRC is doing its due diligence within the R&D world, to ensure the treasury is being allocated correctly, and as intimidating as this may sound at first, there is nothing to be afraid of as a company. Strong R&D claims will always have good supporting evidence behind them, and working with a trusted partner to help present this to HMRC will leave you in good stead within the investigation.

The most common results of these investigations are three potential outcomes;

  1. Your claim passes this check and continues to approval for the claim to be completed.
  2. Your claim is moved into a compliance review.
  3. Your claim gets rejected in its entirety.

Businesses need to ensure they are proactive in ensuring their claims are backed by solid and accessible evidence, which minimises the risk of any complication during the FIS check process.

Providing the best support your claim not only for compliance checks but also in the case of an FIS opening relied on the quality of your supporting evidence. Here at Kirby and Haslam, we are seasoned experts within R&D compliance, and working alongside us can help ensure your claim is robust and sustained by sufficient evidence.

If you have any further questions or concerns surrounding this process, or are currently facing an FIS check, contact us today on 0330 002 1362 or email us at enquiries@kirbyandhaslam.co.uk to discuss your claim.

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A Closer Look at HMRC’s Additional Information Forms  

From the 8th of August 2023, claims submitted for the Research and Development (R&D) tax relief scheme have been required to send in advance an Additional Information Form (AIF). This change was originally announced in April of this year, and here at Kirby and Haslam, we have been working to streamline this transitional period for our clients as much as possible. Now, a month on from these regulation changes taking effect, it’s hugely important to understand how these procedures can potentially impact your claim.  

What is the AIF?   

The Additional Information Form supplements the previous submission system, providing a summary breakdown of the work undertaken over the course of the claim period, which is followed by full financial detailing and narrative on submission. Alongside the required financial and expenditure information, companies looking to claim on the R&D tax scheme will now also have to feature information on the projects undertaken in a formal, standardised system.   

Having been introduced by HMRC, this form is a requisite for claiming on the R&D tax relief scheme and intends to reduce the potential for erroneous or fraudulent submission. Any claims submitted without this information will be automatically rejected; HMRC have reported that as of September 2023 nearly half of all claims they have received since the 8th of August did not include the mandatory AIF. This is exactly why it is paramount to comply with these new guidelines and work with a reliable partner, as failure to submit an AIF in advance will result in your R&D relief being instantly rejected.  

Procedural Changes  

Responding to the procedural amendments, originally announced in April, Kirby and Haslam worked to introduce pre-submission reports that encapsulate the required information for R&D claims. These built upon the previous post-submission structure and were in operation within the company far ahead of August. This has allowed for a much steadier transition into the new AIF system, with clients already prepared for the further information required. Being proactive and adapting to these processes early equally allowed for internal changes within Kirby and Haslam, with structures being implemented to allow a more efficient workflow within these reports. As a result, all of our submissions made since August 8th have been supported in advance by the relevant AIF.  

Moving forward, the structure of these submission reports may be updated and improved upon in response to any potential feedback or regulation updates from HMRC.   

How This Affects You  

Submitted claims moving forward will require the AIF breakdown of eligible R&D costs, as well as information surrounding the R&D projects. Eligible costs can include expenditure such as staffing costs for employees involved within the project, subcontractor wages and material pricing used within the project. This will be required alongside a report of the work undertaken, detailing challenges faced over the course of the project, as well as how your project sought to innovate within its industry and the activities undertaken to achieve these goals.  

Claims submitted prior to the regulation changes will not require AIF amendments to the submissions. However, HMRC may still choose these cases for compliance checks during their R&D relief enquiries, which require their own post-submission reports.   

Looking ahead 

Further changes to the R&D regulations are expected to come in 2024, with amendments to qualifying expenditure being introduced within April of next year, and a proposed merger between the RDEC and SME schemes. As the landscape continues to evolve, we at Kirby and Haslam will endeavour to continue our proactive responses to these regulation advancements, ensuring our reports remain compliant within the changing guidelines.  

With this constantly adapting landscape, we strongly advise working alongside an R&D compliance specialist such as ourselves to stay ahead of these changes.