Ian Davie
Senior Consultant
In a recent development, TBAT Innovation successfully navigated an HMRC compliance check on an R&D Tax Claim for a client, culminating in a positive resolution through Alternative Dispute Resolution (ADR).
The client approached our R&D tax team for assistance after their accountant had prepared an R&D claim that came under scrutiny during the compliance check process.
During the review, we quickly identified that certain costs were ineligible and should not have been put into the claim, and declared this with HMRC. Despite engaging in multiple rounds of Q&A with HMRC, subsequent responses were rejected, prompting the decision to pursue ADR to seek a resolution on the project.
At TBAT, we have historically found ADR’s to be challenging, with HMRC refusing to make decisions or commitments. However, the assigned caseworker was engaging and actively sought clarification through targeted questions, ultimately accepting the project as R&D.
Our observations following on from this, were the following:
In the context of R&D tax claims, Alternative Dispute Resolution (ADR) refers to a process used to resolve disputes or disagreements between a taxpayer (claimant) and HM Revenue & Customs (HMRC) regarding the eligibility of R&D expenditure or the overall validity of an R&D tax claim.
When a taxpayer submits an R&D tax claim, HMRC may conduct a compliance check to verify the accuracy and legitimacy of the claim. During this process, HMRC may raise queries, seek additional information, or challenge certain aspects of the claim if they have concerns about its validity.
If disagreements arise between the taxpayer and HMRC during the compliance check, and if the issues cannot be resolved through regular communication and submission of supporting documentation, the parties may opt for ADR as a means to resolve without resorting to formal litigation or tribunal proceedings.
The use of ADR in the context of R&D tax claims involves engaging a neutral and impartial HMRC facilitator or mediator to help facilitate discussions between the taxpayer and HMRC. The ADR process aims to encourage constructive dialogue, clarify misunderstandings, and explore potential solutions to resolve the dispute in a timely and efficient manner.
During ADR for R&D tax claims, the parties may discuss and clarify specific issues related to the claim, present additional evidence or explanations, and work towards reaching a mutually acceptable resolution. The facilitator may help identify key areas of disagreement, guide discussions, and assist in finding common ground.
It’s important to note that ADR for R&D tax claims is voluntary, and both parties must agree to participate in the process. The goal of ADR is to achieve a fair and balanced outcome that resolves the dispute effectively while minimizing the burden and cost associated with formal appeals or legal proceedings.
If you would like to speak to a member of the TBAT Innovation R&D Tax team regarding your R&D Tax Claim, get in touch using the form below.
When it comes to claiming R&D tax relief, many businesses in design-heavy industries often ask the same question: Can we claim for the cost of acquiring designs? While buying existing designs does not qualify for relief, the good news is that further work to modify, develop or improve those designs often does. If your business is undertaking technical design work as part of an innovation project, there may be significant relief available.
From 1 April 2026, all tax advisers, including those involved in R&D tax claims, must be registered with HMRC and meet new minimum standards to act on behalf of clients. This move is part of HMRC’s drive to raise professional standards, reduce fraud, and improve oversight within the tax advisory industry. Learn who will be affected by these changes and what at your business needs to do to stay compliant.
Assists organisations in accessing research and development grant funding across a range of UK and EU schemes and industry sectors.
Get In Touch