R&D HMRC Enquiry Support

Helping you resolve a HMRC compliance check

What is a HMRC compliance check?

HMRC may initiate a compliance check by asking a series of questions about your R&D claim. This process is typically conducted through remote correspondence and can take place at any point within the ‘enquiry window,’ which lasts up to 15 months from the submission date.

While a compliance check might feel daunting, it’s important to remember that HMRC has increased the number of R&D claims undergoing these checks. However, their approach generally follows a structured and predictable process, which we outline here.

Why do HMRC raise compliance checks?

HMRC may raise a compliance check for several reasons, including the following:

1. Errors in the Financial Assessment

HMRC might identify errors in the financial details submitted with the R&D claim, such as:

2. Issues with the Technical Basis of the Claim

There may be concerns about the technical justification for the claim, such as:

3. Other Possible Reasons

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What do HMRC ask in a compliance check?

Receiving a letter from HMRC requesting information that was already provided in the original submission can be disheartening. However, due to the varying levels of detail submitted by claimants, HMRC often uses a templated letter to request standard information in the first instance.

The compliance check correspondence will come from one of three HMRC teams, depending on the size and complexity of the claimant’s business:

What information does HMRC ask for?

The process usually starts with a schedule of information asking for the following:

01.

An explanation of what the scientific or technological advance is.

02.

An explanation of what the scientific or technological uncertainties are.

03.

Details of how and when the uncertainties were overcome.

04.

A detailed itemisation of the costs included in the claim.

05.

Further details on subcontractor and EPW costs being claimed for.

06.

If cost apportionments have been made, what was the basis and rationale for these.

07.

Confirmation that costs incurred have been paid.

08.

An opportunity for the claimant to provide any further details they believe would assist HMRC in assessing the claim.

HMRC may occasionally ask more specific technical questions based on the narrative provided in the original claim. However, their initial request is usually quite generic. If the original claim was submitted with all the required information, you may find yourself duplicating details that HMRC already have.

Claimants are given 30 days to respond to HMRC’s request. In some cases, an extension of 7–14 days may be granted, depending on the reason provided for the delay.

What happens next?

HMRC typically responds within 30 days, and their reply usually includes the following:

Why Choose us for HMRC Enquiry Support?

Navigating an HMRC compliance check can be stressful and time-consuming, but with our expert guidance, you can face the process with confidence. Here’s why businesses trust us:

The Final Stage

If HMRC is satisfied with the responses provided, they will issue a final closure notice confirming that “your tax return does not need to be amended.” Great news!

However, if HMRC remains unsatisfied, they will issue a closure letter outlining their position. This letter will typically include:

What can you do if HMRC does not believe R&D is taking place?

If HMRC concludes that R&D is not taking place, the claimant has the following options:

1. Request an Independent Review

The claimant can request a review by the Solicitor’s Office and Legal Services (SOLS) team within HMRC. This team conducts a thorough review of all correspondence between both parties and assesses whether the compliance check was handled correctly.

However, it’s important to note that due to the rising number of compliance checks and referrals to SOLS, there are currently significant delays in this process.

2. Appeal to a Tribunal

If the SOLS team upholds HMRC’s decision, the claimant can escalate the matter to a tribunal. While recent tribunal cases have seen claimants successfully overturn HMRC decisions, this option is also a lengthy process due to the high volume of compliance checks.

3. Alternative Dispute Resolution (ADR)

Claimants may also consider using Alternative Dispute Resolution (ADR). This process allows both parties to work collaboratively with an independent mediator to resolve disputes. The mediator helps facilitate discussions and identify potential resolutions without the need for formal litigation.

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HMRC R&D Disclosure Service

If your company has overclaimed R&D tax relief and can no longer amend its Company Tax Return, you must notify HMRC using their R&D Disclosure Service.

Who should use this service?

How to Disclose:

HMRC will review your disclosure and respond within 30 days. Acting promptly can reduce penalties and ensure compliance.

How can Innovation Tax help?

In the event of a compliance check, we would check that the opening of the enquiry was valid (i.e. within the correct timeframe and with the correct correspondence) before undertaking a review of the claim submitted and helping prepare suitable responses to HMRC. There have been cases where the letters have been issued which state the incorrect claim period and, by the time this was corrected, the enquiry window had closed, hence the checking and reviewing of these details is of the upmost importance.

Seek Advice from a Specialist

Don’t let an HMRC enquiry slow your business down. With our expert guidance, you’ll have the support and confidence to navigate the process seamlessly and we will do our utmost to protect your R&D claim as long as it’s compliant.

Contact us today for a free consultation

to discuss your case and learn how we can help you achieve the best possible outcome.

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to discuss your case and learn how we can help you achieve the best possible outcome.