18 June 2026
3 min read
Keeping HMRC abreast of any notable changes in a client’s business will help avoid unwanted enquiries. In this piece, we consider the benefits of regularly assessing the accuracy of SIC codes.
By James Allen, ABGi UK Technical Writing Consultant
The nature of innovative companies is that they are not stationary. Constantly evolving and adapting.
This is true for their practices and processes, but even the core business can change over time.
If that happens, then HMRC needs to know about it. Letting the tax body find this out for itself is an opportunity for a compliance check on the client’s activities and further investigations.
For this reason, it is, therefore, good practice to reassess a client’s standard industrial classification of economic activities (SIC) code each time they are reengaged for an R&D tax incentive claim.
Every single UK business must have at least one SIC code.
With up to a maximum of four permitted, these codes are used to classify the nature of the work that a business is engaged in and enables, among other use cases, the Office of National Statistics to identify emerging trends within the UK economy.
For many, the five-digit code first submitted to HMRC when initiating the business, will stay the same throughout the company’s lifecycle.
However, particularly with the adoption of advanced computational systems and Artificial Intelligence (AI) across a wide range of industries and sectors, there is a need to ensure the SIC codes remain applicable.
Take one real-life illustration. A large ABGi client, historically engaged in manufacturing has recently setup an in-house software development team.
The nature of this new activity relates heavily to R&D done in the claim period, and is fundamentally different to its core business, so the sudden inclusion of £500,000 of software development in the next year’s R&D claim would undoubtedly raise eyebrows.
Encouraging the client to update or amend its SIC codes would remove such suspicion.
Whether HMRC is utilising AI to compare SIC code disparities between what is submitted on AIFs with the client’s relevant code stored on its database is unclear.
What is clear is that ensuring SIC codes remain relevant is a simple enough task and one that should be incorporated into a consultant’s workflow processes.