R&D Tax Credits are a Government tax break that enables a company (only companies can claim) to reclaim up to 33% of their R&D costs, even if the project failed. With such a generous tax relief, HMRC are paying attention to claims, and we reported in last month’s tax summary new rules on the level of the relief that can be surrendered for a cash repayment now apply. We have also heard (not seen one yet) HMRC are issuing nudge letters in relation to R&D software claims. The letters are not enquiries and they do not mean that the claim submitted is invalid or incorrect but ask if your R&D claim is valid (similar to the offshore income nudge letters we have written about on a number of occasions). Following some concerns voiced by HMRC a few years ago re whether the software development was really R&D (not just a rebuild of a website) the software sections of HMRC’s R&D manuals were updated to provide guidance on features which might indicate that a claim was not valid. HMRC appear now to be reminding claimants that they should read the software claim guidance before submitting the claim to ensure that only qualifying claims are made.
Should you receive a letter and need to discuss it, please do not hesitate to contact us.