Ian Davie
Senior Consultant
If you have received a letter from HMRC asking for more information about your R&D tax credit claim, it can be unsettling, particularly if this is your first experience of an HMRC R&D compliance check. For many businesses, this is the point where uncertainty sets in, especially against the backdrop of increased scrutiny around R&D tax credit claims.
More businesses are now going through R&D tax credit enquiries as HMRC applies closer scrutiny to how claims are presented and evidenced, with an average of 17% of all claims being in enquiry. In most cases, these checks are not accusations of wrongdoing, but requests for clarity. Understanding what happens during an HMRC R&D compliance check, and what HMRC is actually looking for, can turn a stressful process into a manageable one and help businesses respond with confidence.
An HMRC R&D compliance check is a formal review of an R&D tax credit claim that has already been submitted. Its purpose is to allow HMRC to confirm that the claim meets the requirements of the R&D tax relief legislation and has been prepared in line with current expectations.
In practical terms, HMRC is trying to answer a few straightforward questions about the claim:
It is important to remember that an HMRC R&D enquiry is not, by default, a challenge to a business’s integrity or its innovation. Many compliance checks are triggered through risk profiling or data-led selection, rather than because HMRC believes something is wrong with the claim.
Most HMRC R&D compliance checks begin with a formal letter sent to the company or its appointed agent. This letter confirms that HMRC is reviewing the R&D tax credit claim and outlines the information they would like to see.
The initial HMRC correspondence will usually be of a fairly standard format and set of questions:
This first stage is particularly important. The clarity, structure, and consistency of the initial response often influence how smoothly the rest of the compliance check progresses. Well-prepared responses can significantly reduce the likelihood of extended follow-up questions.
While no two HMRC R&D enquiries are identical, there are clear patterns in the information HMRC typically requests. These requests usually fall into two broad areas: technical detail and financial evidence.
From a technical perspective, HMRC wants to understand the nature of the R&D activity being claimed and whether it meets the definition of R&D for tax purposes.
This often includes:
HMRC is not looking for marketing language or high-level descriptions. They are looking for specific, credible explanations that demonstrate genuine technical challenge and advancement. This is where generic or template-style narratives often fall short.
Alongside the technical explanation, HMRC will usually request more detail on the costs included in the R&D tax credit claim.
This may involve:
This is often the point where technical explanations and financial calculations need to align closely. Cost calculations that are logical, proportionate, and well-documented are far easier to explain and defend during an HMRC R&D compliance check.
Once a response has been submitted, HMRC will review the information provided and decide whether further clarification is required.
At this stage of an HMRC R&D enquiry, one of three outcomes usually follows:
In many cases, particularly where claims are well prepared and clearly explained, HMRC is satisfied at this stage, and the enquiry is closed without adjustment. Clear, consistent responses that align with the original R&D tax credit claim help reduce unnecessary back-and-forth.
There is no fixed timeframe for an HMRC R&D compliance check. The length of the process depends on several factors, including:
Some R&D compliance checks are resolved within a few months. Others may take longer, often due to the volume of enquiries HMRC is handling rather than specific concerns with an individual claim.
Responses to individual letters can take from a couple of weeks to months. If more than four weeks it is worth chasing HMRC.
In our experience, HMRC R&D enquiries are more likely to become drawn out where:
These issues do not automatically mean a claim is invalid. However, they can make it harder to demonstrate eligibility and often extend the compliance check unnecessarily. Most of these challenges are avoidable with the right preparation and technical understanding from the outset.
As discussed in our earlier article on why HMRC enquiries into R&D tax credits are rising, the fundamental definition of qualifying R&D has not changed. What has changed is the expectation that claims can be clearly explained and defended if reviewed, with technical reports now compulsory and in a standard format from August 2023.
A defensible R&D tax credit claim:
Claims that are prepared with potential HMRC enquiries in mind are significantly easier to manage during a compliance check and far less likely to escalate.
At TBAT Innovation, we regularly support innovative businesses through HMRC R&D compliance checks and enquiries. This experience means we understand how HMRC frames its questions and the level of technical and financial detail expected in responses.
Our role is to:
We also work proactively with businesses to strengthen future R&D tax credit claims, reducing the likelihood of further HMRC enquiries.
Whether you have already received an HMRC R&D compliance check letter or simply want reassurance that your R&D tax credit claims are robust and defensible, the right support can make the process far more manageable.
HMRC is increasing its scrutiny of R&D tax credit claims, with more businesses receiving compliance enquiries months after submission. Understanding why HMRC enquiries are rising, and how to respond, can help businesses protect their R&D claims and reduce disruption. Learn what triggers HMRC R&D enquiries, what HMRC expects, and how to ensure your claim is protected.
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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