Last Friday, HMRC published guidance on changes and issues affecting the Corporation Tax online service. This means that at present various claims and other actions are currently restricted. HMRC has also sent a further update on the pausing of R&D tax credit repayment claims which we set out in full later.
The main corporation tax claims and other corporation tax issues currently restricted are:-
- annual investment allowance claims in excess of £200,000;
- loans to participators charged at the new Section 455 tax rate of 33.75% applicable from 6 April 2022;
- research and development (“R&D”) enhanced expenditure claims (but not SME R&D payable tax credit claims or R&D expenditure credit (RDEC)) for accounting periods beginning on or after 1 April 2022; and
- companies claiming both RDEC and reporting income tax deducted from profits.
According to the guidance, HMRC aims to resolve these issues from 16 September 2022 so that returns can be filed. In the meantime HMRC will accept paper returns - see HMRC’s service issues page on how to file paper returns and the other criteria which must be satisfied.
More information is also available in the guidance on the other specific types of claims and scenarios affected.
Further update on the pausing of R&D tax credit repayment claims
The full update from HMRC reads as follows:-
“As you may be aware, we recently had to pause some R&D payments and extend our standard processing times. We are now in a position to explain why we needed to do this:
- Since April we have faced an increase of fraud within the RDTC relief. While some of this fraud is opportunistic, some is linked to organised criminal gangs. As you would expect, HMRC responded quickly by pausing all payments and by strengthening our systems accordingly.
- Our aim is to protect the R&D scheme from such attacks while minimising any delays or enquiries for legitimate claimants. However, in this instance, the nature of the attacks (alongside the fiscal risk to the Exchequer) meant we had to respond quickly and robustly by pausing all R&D payments on the 28th April 2022.
- Our operational response culminated with further risk assurance checks to react to the increased number of fraudulent claims. Since April 1st we have received over 8000 RDTC claims, which all need to go through our further scrutiny processes.
- We do recognise that these additional checks may cause delays to legitimate businesses and appreciate their patience as we work through these exceptional circumstances. We want to reassure legitimate claimants that we are working hard to expediate claims as soon as we can.
- While we are pleased that we could restart paying RDTC claims from the 10th May 2022, the nature of the additional operational checks (required to protect the R&D relief) means that it is not currently feasible to offer a 28 day payment turnaround for claims and we think the standard service level will need to be 40 days. We are working to recover from the recent pause in payments and expect to be processing 80% of claims within 40 days, by the end of August 2022.
- While we cannot go into the detail of our ongoing investigations and compliance activity, we do want to explain to tax agents that we have a duty to challenge irregular claims, requesting more information if we believe it is appropriate. We have already issued over 1000 letters to claimants which have been identified as high risk, challenging irregular claims.
- As soon as we have further news on our progress, we will let you know. With this in mind, we ask R&D claimants to bear with us and kindly ask them not to contact the R&D helpline/mailbox to chase their claims. We also ask you not to contact any HMRC official about a claim. Instead, agents should check the company’s online account to check the status of their claim.
- We hope that our recent activity reassures agents that we are committed to tackling abuse of the R&D relief scheme, ahead of the R&D reforms announced previously at Autumn Budget 2021.
- If you become aware of any fraudulent R&D claims, please do make us aware through our usual reporting systems, see below: