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R&D claims: the triggers for an enquiry

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HMRC is opening an increasing number of enquiries into R&D claims as it seeks to ensure that R&D tax relief is available only for those businesses undertaking genuine R&D activities. One warning sign is when a claim is significantly out of line with those made by other businesses operating in a similar industry. Common errors in R&D claims which may trigger an enquiry include claims made under the wrong scheme; claims for subcontractor and subsidised costs; claims for excessive staff costs and/or for consumables that are not used up or transformed in the R&D; claims where there is a readily available alternative in the market; and claims lacking a sufficiently clear explanation of the technical background. HMRC is alert to the risk of fraudulent claims, and forthcoming measures have been announced to tackle abuse of the R&D scheme.

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