What do I do if my R&D Tax Credits claim is compliance checked?

Don’t panic! 

HMRC R&D Tax Credits Compliance Officers are engaged to review current and retrospective R&D Tax Credit Claims. Just because a compliance check is being made, it may not be that your claim has raised a red flag, it could be that it has been randomly selected. Every year HMRC check a significant number of claims to make sure that the R&D being claimed for qualifies and that the correct amount of relief is being paid out. They may be conducting checks on all claims from a specific sector, or from companies who are submitting their first claim, for example.  

If TBAT Innovation is responsible for your claim, we will work with you to put together your response and ensure that we robustly defend your claim. After all, we will have a good understanding of the work undertaken and why your R&D qualifies for relief! 

What is the communication flow?

You will be notified by HMRC R&D Tax Credits compliance of a compliance check, via your accountant with a compliance check opening notice. This will be a letter from the Compliance Officer introducing: 

  • The processes 
  • Explaining what they need to check and why 
  • What will happen after the checks are complete  
  • How to contact the Compliance Officer  

It is very important that you read through this document, as well as note down any deadlines that the Compliance Officer has included, as it is likely that the required response and provision of documents will be time-bound.  

After the introductory letter, a more detailed and specific section to your claim will explain what you will need to provide to the Compliance Officer to allow them to complete the check. This could include, for example: 

  • A more detailed description of the R&D undertaken and how it qualifies against the government guidelines for eligible R&D activities (BEIS Guidelines) 
  • A more detailed breakdown of R&D project costs: 
  • Staffing 
  • Software and consumables  
  • Externally Provided Workers (EPW) 
  • Subcontractors 
  • Bank Statements proving that payments have been made  
  • Contracts with subcontracted R&D providers 
  • Rationale and methodology used to define R&D expenditure  

Details on how to send documents supporting your R&D Tax Credits to the Compliance Officer will be provided in the initial letter. 

It is important that you are completely open with the Compliance Officer and provide them with all the information that has been requested before any deadline. If you need more time, or if you can’t provide some of the information requested, let the Compliance Officer know directly or in your response. 

They may have further questions to ask following your initial response, in which case further deadlines will be set.  

After the check

Once the check is complete, the Compliance Officer will write to you to explain whether: 

  • They are satisfied that everything is correct 
  • You will need to pay more tax 
  • HMRC need to repay any tax to you

If you’re looking for additional help with your R&D Tax Credits Claim, please contact us.

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