What to do if you receive an R&D tax credit claim rejection from HMRC

Has your R&D tax credit claim been rejected by HMRC? HMRC can deny a claim even before an enquiry has been made, which can be frustrating. However, the rejection is not a final outcome. Alexander Clifford are R&D specialists who have helped many businesses appeal R&D tax credit rejections and achieve the full payout.

We clear up what to do if HMRC denies your R&D claim, with a step-by-step framework for turning your rejected claim into a success.

Why was my R&D claim denied? – The rise of HMRC R&D compliance checks

When an R&D tax credit claim is rejected by HMRC, it usually follows a compliance check or R&D enquiry letter. The increase of HMRC R&D compliance checks has caused a rise in unfair enquiries. Understanding why HMRC refused your claim is a good basis for building a successful appeal.

What are the four most common reasons for HMRC R&D claim denial in the UK?

There are a few classic reasons for HMRC R&D claim denial. The four most common reasons for HMRC R&D compliance checks and R&D tax credit claims being rejected by HMRC are:

1. Vague scientific or technological advance – HMRC may argue that your project didn’t achieve a true advance, or that the outcome was ‘readily deducible’ by a competent professional
2. Misaligned qualifying expenditure – Common errors include claiming for non-qualifying costs, or over-claiming. Always align your costs with qualifying R&D expenditure as defined in HMRC’s official criteria
3. Lack of supporting evidence – If your technical report or cost breakdown is thin or doesn’t clearly link your activities to costs, HMRC may decide there’s not enough proof to approve the claim
4. Filing errors – Mistakes in the Additional Information Form (AIF) or claim notification form (CNF) can also lead to rejection, even if your project qualifies

Checklist: Appealing an R&D tax credit rejection within 30 days

Once your R&D tax credit claim is rejected by HMRC with a formal closure notice or decision letter, you have 30 days to appeal the R&D tax credit rejection. Missing this deadline can cause HMRC to refuse your appeal, so gather supporting documentation that backs up your claim and shows compliance.

Here’s what to do if HMRC denies your R&D claim:

Step 1: Request an HMRC review

The first step after an R&D tax credit claim is rejected by HMRC is to request an internal review, where a different HMRC officer re-examines your case. Submit a detailed response to the R&D tax credit rejection, addressing each query, backed by clear evidence. Specialist R&D consultants can help you to build an argument that meets HMRC R&D tax credit guidelines.

Step 2: Assess your options – acceptance, appeal, or Alternative Dispute Resolution HMRC R&D (ADR)

If the internal review doesn’t resolve the issue, you must now either accept the decision, appeal your R&D tax credit rejection, or go through Alternative Dispute Resolution HMRC R&D (ADR). Professional representation can make a huge difference in your appeal outcome.

What is the formal process for appealing an R&D tax credit rejection?

If you feel the decision for your R&D tax credit claim being rejected by HMRC was unfair, you can appeal the R&D tax credit rejection. A specialist can give you the best chance of success with HMRC R&D enquiry support. The options for the R&D tax relief claim appeal process in the UK are:

Alternative Dispute Resolution HMRC R&D (ADR)

Alternative Dispute Resolution HMRC R&D (ADR) is a mediation process that offers a structured, confidential setting to discuss your appeal for your R&D tax credit rejection with HMRC and a neutral mediator who can reassess your claim. Most disputes are resolved at this stage, avoiding the expense of a full legal process.

First-Tier Tribunal (FTT) for R&D claims

If mediation fails when appealing R&D tax credit rejection, next will be the First-Tier Tribunal for R&D. This is a legal hearing where both sides present evidence and testimony. HMRC will issue a Statement of Case outlining its position. A successful outcome is dependent on you having expert evidence, so you should provide a rebuttal supported by a competent professional and a barrister.

How can Alexander Clifford defend my R&D claim?

Wondering what to do after HMRC denies an R&D claim? At Alexander Clifford, we specialise in navigating HMRC disputes and appeals for R&D tax credit rejection. Our team can help you understand the HMRC R&D claim denial, and achieve R&D claim defence success.

R&D evidence review and technical report defence

If your R&D tax credit claim has been rejected by HMRC, our consultants can re-examine your claim and rebuild the technical narrative. We ensure the project’s eligibility aligns with the HMRC R&D tax credit guidelines and the Department for Science, Innovation and Technology (DSIT) criteria. This approach often results in a reversal of HMRC’s decision.

Working in line with HMRC’s R&D compliance checks

With the rollout of the Merged Scheme in April 2024, HMRC has been using random audits and more compliance staff to crack down on fraud. The rise of HMRC R&D compliance checks has led to some R&D tax credit claims being wrongly rejected by HMRC, but we can combat this by speeding up correspondence and preventing unnecessary disputes.

How can I avoid future R&D claim rejections?

The best defence to avoid future R&D tax credit claims being rejected by HMRC is to regularly update your records, document clear cost allocation, and identify your competent professional in line with HMRC definitions. 

Can my R&D consultant prevent enquiries?

Low-cost, volume-based firms produce claims that fail to pass HMRC R&D compliance checks. Specialist R&D consultant expertise on the other hand, ensures technically robust claims, so you can ensure your next claim is strategically prepared to pass HMRC scrutiny.

What to do if your R&D tax credit claim is rejected – FAQs

As HMRC steps up its R&D compliance checks, there are a few common reasons for HMRC R&D claim denial that businesses are facing. Many clients ask us what to do if HMRC denies an R&D claim.

FAQs about the R&D tax relief claim appeal process UK:

What is the deadline for appealing an R&D tax credit claim rejection from HMRC?

As part of the UK R&D tax relief claim appeal process, you generally have 30 days from the date of HMRC’s formal decision or closure notice to request a review or appeal for your R&D tax credit rejection. If you miss the deadline, you must provide a good reason.

Can I appeal an R&D claim rejection without a specialist R&D consultant?

You can appeal an R&D tax credit claim that has been rejected by HMRC without consulting a specialist, but it’s not recommended. The appeal process for an R&D tax credit rejection is complex, and professional help can increase your chances of success.

What is a First-Tier Tribunal for R&D claim rejection?

A First-Tier Tribunal for R&D is an independent tax tribunal for appealing R&D tax credit rejection that settles disputes between HMRC and taxpayers. You can present evidence and expert testimony before a judge.

What are the biggest pitfalls when appealing an R&D rejection?

To appeal successfully, it helps to understand the reasons for your HMRC R&D claim denial. Failing to act within 30 days of rejection, providing weak technical evidence, or resubmitting the same claim without addressing HMRC’s points is unlikely to lead to a successful turnaround.

If HMRC rejects my R&D claim, will I get a penalty?

Having an R&D tax credit claim rejected by HMRC doesn’t always trigger a penalty. Penalties usually apply only if HMRC believes you were careless, or deliberately provided misinformation. The penalty will be proportionate to the severity of your error.

What if I miss the appeal deadline for R&D?

You can request a late appeal if you have a good excuse, but HMRC or the First-Tier Tribunal for R&D must accept the delay as reasonable. Missing the 30-day deadline significantly reduces your chances of success.