Dealing with Revenue Audits on R&D Tax Credit Claims

The proactive approach to claiming R&D Tax Credits

Braithwaite recommends preparing the technical and financial costing information before an R&D claim is submitted to Revenue. When a claim is submitted, it is Revenue’s process to review the claim internally, which may result in request(s) for additional supporting information and/or an onsite audit. Taking a proactive approach in preparing the technical and financial costing information ensures that the information is ready should Revenue issue such a request. It is important to remember that Revenue is able to query your claim within four years.

What to expect when an R&D claim is selected for further review and/or audit.

If a claimant is contacted by Revenue regarding an R&D claim either by a phone call or a Revenue letter, it is recommended to contact the R&D consultant first before making any communication with the Revenue inspector.

Generally, as the first step of an audit, Revenue sends out a questionnaire with 23 questions to cover the details of the R&D claim. It queries such information as to understand how the R&D claim meets the science and accounting tests. Revenue also requires the claimant to provide the linkage between the qualifying project(s) and the claimed R&D expenditure.

Engaging Visiativ Ireland Consultants

By working with Visiativ Ireland, we will have such information ready by the time this questionnaire is received, and we will be able to revert back to Revenue promptly once the correspondence is reviewed and confirmed.

If the Revenue inspector agrees that the provided information is sufficient and the R&D projects are deemed eligible, the claim will be approved. If the inspector does not fully understand the information provided or has some further questions to be clarified, the inspector may issue another letter for further clarification or request for a visit to review the R&D claim onsite. If such an onsite audit should take place, Braithwaite will help the claimant prepare prior to the meeting as well as facilitate during the meeting.

Revenue audit meeting

The meeting covers two aspects of the claim to assess its eligibility and the qualifying expenditure. After the inspector has a general understanding of the company’s business background, the inspector will be interested in hearing from the claimant to explain the R&D projects and how they meet the qualifying criteria defined/interpreted in the latest Revenue Guidelines.

Subsequently, the inspector reviews the costing information to discuss if the claimed amount is commensurate with the work performed and how each item is linked to the qualifying projects claimed. During such a meeting, Revenue may request for documentation to support the claim. Therefore, it is our recommendation to maintain contemporaneous documentation in case of an audit. Although it does not happen often, Revenue may choose to involve an external reviewer (an expert from University or Industry) to assist the science review if necessary.

Are audits common for first time filers?

Revenue does not differentiate the claims submitted by first-time filers and experienced filers. The claim is assessed by its supporting documentation and an onsite audit happens when some additional clarification is needed. However, due to lack of filing experience, first-time filers usually require more assistance in preparing for the audit meeting, and the Braithwaite team will be able to assist given our experience with many first time filers.

Can I get audited if I have filed successful claims in the past?

Auditing is part of the Revenue’s process to ensure that the R&D claims are meeting the current standard of requirements. Any change in legislation or Revenue Guideline may result in a gap of understanding. To ensure the claimants understand the changes, audits may happen to any claimant whether claims have been accepted or rejected in the past.

The R&D tax credit programme is designed to review the claim on a yearly basis. As a result, projects deemed qualified in the previous year may not be qualifying in the next year. Therefore, audits may happen to claimants who have had successful claims in the past, however the Visiativ Ireland team will ensure that our clients maintain an up-to-date knowledge of the programme due to the updates made by Revenue.

Visiativ Ireland can assist you in obtaining tax credits for research and development activities. Whether your work involves basic research, applied research, or experimental development, Braithwaite can take the uncertainty out of the filing process and get you the credit you deserve for your innovation.

For our range of Audit Support Services, please contact us.