Ian Davie
Senior Consultant
If you have claimed R&D tax relief recently, or are planning to do so, you may have noticed a growing focus on HMRC enquiries into R&D tax credits and R&D compliance checks.
More businesses are now receiving letters from HMRC requesting additional information about their R&D tax credit claims. In many cases, these HMRC R&D enquiries are opening months after a claim has been submitted, catching finance teams by surprise and creating uncertainty about what HMRC expects next.
HMRC is increasing its scrutiny of R&D tax credit claims, but this does not mean businesses are being accused of wrongdoing. While the rise in HMRC enquiries is real, most R&D compliance checks are driven by data-led risk profiling rather than suspicion. With the right preparation, many HMRC enquiries can be resolved efficiently and without disruption.
So, what is driving the increase in HMRC R&D enquiries, and what should businesses do to protect their claims?
It’s important to note that an HMRC enquiry is not an accusation. One of the biggest misconceptions we see is that an HMRC compliance check automatically means something has gone wrong. It does not.
An HMRC R&D enquiry is a request for clarification. It is HMRC asking businesses to explain:
Many R&D tax credit enquiries are risk-based or routine, rather than a challenge to the legitimacy of the innovation itself. However, they do require a clear, structured, and technically sound response, which is where some businesses encounter difficulty.
R&D tax relief has been marketed heavily in recent years, often with promises of fast claims, minimal input, or guaranteed outcomes.
While R&D tax relief can deliver significant value when claimed correctly, this style of marketing has contributed to an increase in poor-quality R&D tax credit claims.
Common issues include:
In many cases, businesses are unaware that their claims have been framed in this way on their behalf.
HMRC has responded by applying greater scrutiny to R&D claims that lack technical depth, clarity, or supporting evidence. This approach is not about discouraging innovation. It is about distinguishing robust, well-prepared claims, that represent genuine R&D, from those that are not defensible under review.
R&D tax relief represents a substantial annual £8 billion government investment intended to encourage innovation, improve productivity, and support economic growth.
As a result, HMRC is under pressure to ensure that R&D tax relief:
This has led to a more rigorous approach to reviewing R&D tax credit claims, particularly where the link between the R&D activity and the relief being claimed is unclear.
Importantly, this does not indicate a reduction in support for innovation. Instead, it reflects a drive to ensure that R&D tax relief delivers its intended impact.
For businesses, this means claims must clearly demonstrate why the work qualifies as an advance or capability in a scientific or technological area, how uncertainty was addressed, and how costs relate directly to the R&D undertaken.
HMRC now has access to more sophisticated data and improved risk-profiling tools, allowing it to identify claims that warrant closer examination without relying on random selection.
R&D tax credit claims are more likely to be reviewed where they include:
Being selected for an HMRC compliance check does not mean a claim is incorrect. It simply means HMRC wants to better understand how the claim has been constructed.
Where projects are well documented, technical explanations are clear, and costs are properly calculated, enquiries are often resolved through straightforward clarification.
In short, R&D tax relief still works, but claims must be defensible.
HMRC has not changed the fundamental principles of what qualifies as R&D. What has changed is the level of scrutiny applied to how claims are presented, explained, and evidenced.
What qualifies as R&D activities?
Surface-level submissions, bullet-pointed reports, and vague explanations are no longer sufficient. HMRC expects businesses to demonstrate:
This does not mean R&D tax credit claims should be smaller. It means they should be stronger, clearer, and better supported.
For businesses carrying out genuine innovation, this shift is positive. A well-prepared claim should stand up to scrutiny.
It’s important to note that an HMRC enquiry is not an accusation. One of the biggest misconceptions we see is that an HMRC compliance check automatically means something has gone wrong. It does not.
An HMRC R&D enquiry is a request for clarification. It is HMRC asking businesses to explain:
Many R&D tax credit enquiries are risk-based or routine, rather than a challenge to the legitimacy of the innovation itself. However, they do require a clear, structured, and technically sound response, which is where some businesses encounter difficulty.
A project can meet the definition of qualifying R&D, but that alone is no longer enough.
An eligible R&D tax credit claim is one where the underlying activity meets HMRC’s criteria for scientific or technological advancement.
A defensible R&D tax credit claim can be clearly explained, evidenced, and justified if HMRC opens an enquiry.
This distinction is where many businesses are caught out during an HMRC compliance check.
A claim becomes vulnerable where it:
In contrast, a defensible claim is built with enquiry in mind from the outset, using clear technical narratives, structured project descriptions, and cost calculations that can be traced back to qualifying R&D activity.
At TBAT Innovation, our focus is on preparing R&D tax credit claims that are not only eligible, but robust enough to stand up to HMRC scrutiny.
At TBAT Innovation, we work with innovative businesses across a wide range of sectors, and HMRC R&D enquiries are something we handle regularly.
Our focus is not just on securing R&D tax relief, but on ensuring claims can be confidently defended if reviewed.
Our approach is:
Many businesses speak to us after receiving an HMRC enquiry, but often the most effective support happens before that point. A short review of a past or upcoming claim can identify risk areas early and provide reassurance before HMRC asks questions.
An HMRC R&D compliance check can be intimidating, even for businesses doing genuine innovation. This article walks you through what happens during a check, the information HMRC typically asks for, common issues that can arise, and how TBAT Innovation helps businesses respond confidently and keep their R&D tax credit claims strong.
Since 2022, HMRC’s Mandatory Random Enquiry Programme (MREP) has been reviewing R&D tax relief claims to reduce error and fraud. While the programme is effective in improving compliance, it has also caused a significant drop in SME claims. This article examines the impact of MREP on SME behaviour, explores why businesses are withdrawing from claiming, and questions whether the programme is supporting innovation or discouraging genuine R&D activity.
Assists organisations in accessing research and development grant funding across a range of UK and EU schemes and industry sectors.
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