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Why Do Companies Under-claim R&D Tax Credits

Date: 21st August 2014

Although the number of claims has increased and more expenditure is being included, the HMRC reports that many companies especially SMEs continue to under-claim or fail to claim R&D tax credits. There could be several reasons for this. Some of them include:

  • Claims made by unqualified people: Accountants are indeed qualified to file your tax credits, but to file claims for R&D tax credit your company needs qualified engineers who understand and interpret qualifying terms and conditions better. They work in tandem with accountants to identify project costs that qualify and ensure than non qualifying costs are not included.
  • Clients are afraid that claiming R&D tax credits would lead to unnecessary enquiry from the HMRC: It is true that filing R&D tax credits increases the chances for your company to be audited. But the audit process has drastically changed over the years. A number of lawsuits and procedural regulations have been introduced to make the process clearer and protect businesses making the claim.
  • The process is too technical to understand: Companies especially small and medium businesses think that they cannot claim for work done by sub contractors. Some of them falsely believe their business does not come under the scope of the R&D tax credit, while some are under the impression that unsuccessful projects cannot be claimed. The only way to clear these misconceptions is to speak to professionals specialising in research and development tax credit and allow them to evaluate your business.

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