R&D Enquiries

Date: October 13, 2022

In June 2022, HMRC reiterated their intent to increase the number of their compliance checks following a surge in irregular claim submissions. It is also clear that HMRC have been investing in greater resource via hiring more tax inspectors to facilitate this uptake in claim checks. It’s safe to assume therefore that enquiry rates are increasing for the foreseeable future. Bearing this in mind, detailed below is some insight into what the checks entail.

What is a ‘compliance check’?

The compliance checks seeks to answer 2 fundamental questions:

  1. Is the tax relief claim valid?
  2. Is the tax relief claim accurate? (i.e. Has the claimant company received the correct amount of tax relief, and has it paid the correct amount of tax?)

In doing so, they are ensuring that the funds set aside by the Treasury for R&D tax incentives are being appropriately distributed.

What does the check entail?

Checks will vary by case, as will the duration of the process. Generally, the process will include the following stages.

Note: Deadline extensions can be requested but this is not ideal. They must be requested in writing, with as much advance notice as possible and with good reason. From personal experience, the disadvantage of requesting an extension is that the HMRC case worker is entitled to impose a ‘Schedule 36’ notice for information requested after granting the extension. This notice entitles HMRC to enforce penalties (starting at a £300 charge) where deadlines are not met and are becoming more common.

What can we do to help reduce the risk of enquiry?

HMRC are not transparent about the methodology applied to choosing how claims are chosen for checks, and do not publish data on the number of checks undertaken. From personal experience on enquiry work however, they are becoming more frequent and rigorous. The above demonstrates how lengthy and cumbersome the process can be.

Catax will defend any claim we submit at no extra cost, unlike some other R&D tax consultants. We also have access to independent tax consultants should we need their input, their cost is not passed on to the claimant. Hence, it is costly to dedicate the time and resource to helping our clients see checks through to resolution.

With the above in mind, although there is no way of eliminating the risk of enquiry altogether, there are things we can do to reduce the risk of enquiry, and perhaps shorten the process.

If any of your clients have received a letter from HMRC about their claim, speak to your manager today. 

Live chat
Password Reset
Please enter your e-mail address. You will receive a new password via e-mail.