HMRC

If HMRC opens an enquiry, it will normally ask questions or request further information to establish whether the claim meets the requirements of the R&D tax relief legislation. This may involve examining the scientific or technological basis of the projects, qualifying expenditure, subcontracting arrangements and evidence supporting the claim.

HMRC may issue several rounds of questions, and responses should address the points raised clearly and accurately, supported by appropriate technical and financial evidence.

An enquiry does not automatically mean that a claim is incorrect. HMRC may ultimately accept the claim as submitted, agree adjustments with the company, or conclude that some or all of the claim does not qualify. Where appropriate, decisions can also be challenged through the available review and appeal processes.

There is no fixed timescale. An R&D enquiry can potentially be resolved within a few months, while more complex cases may take considerably longer, particularly where there are multiple rounds of correspondence, complex technical issues or disagreement over eligibility or expenditure.

The quality and completeness of the original claim and the company's ability to provide clear evidence can affect how straightforward the process is. Responding promptly and comprehensively to HMRC's questions can also help avoid unnecessary delays.

Businesses should therefore avoid assuming that an enquiry will be resolved quickly and should consider the potential impact on tax, cash flow and internal management time.

Ideally, you should understand before appointing an adviser what support they will provide if HMRC subsequently challenges the claim.

An adviser that prepared the claim is usually well placed to help because it should understand the projects, calculations and reasoning behind the submission. However, enquiry support is not necessarily included within every R&D advisory agreement. Some advisers include it within their standard fee, while others charge separately or limit the amount of support provided.

Check your engagement terms carefully to understand what is included, whether there are additional charges and how far the adviser will support the enquiry.

If you are not confident in the original claim or the adviser that prepared it, you can also seek independent specialist support to review the position and assist with the HMRC enquiry.

There is no standard cost. It will depend on the complexity of the enquiry, the number and nature of HMRC's questions, the quality of the original claim and supporting evidence, and how long the enquiry continues.

Some R&D advisers include enquiry defence within their original fee or offer a defined level of support. Others charge separately, potentially using fixed fees, hourly or daily rates, or staged fees as the enquiry progresses.

Before appointing an R&D adviser, it is therefore worth asking what would happen if HMRC opened an enquiry, exactly what support is included and what additional costs could arise.

If an enquiry is already under way, the scope and likely cost of defence should ideally be agreed after an initial review of the claim, HMRC correspondence and supporting documentation, so that both the business and adviser understand the work likely to be required.