What is HMRC’s role in R&D tax credits?

Being responsible for administering R&D tax relief, HMRC sets the framework within which R&D claims must be prepared and assessed. HMRC’s role is to publish guidance, define the criteria for qualifying activity and eligible expenditure. They also ensure that claims are compliant with the legislation.

The guidelines and the rules set by HMRC are reviewed periodically, meaning policy and legislation changes are typically updated annually. Major changes are usually introduced in order to cater to adhere to industry needs and advancements.

In practice, companies or their advisers prepare the supporting documentation in line with the HMRC framework. This includes technical narratives that explain how the work sought to advance baseline knowledge, alongside detailed documentation of eligible expenditure. The quality and clarity of this information will often determine how smoothly an R and D tax credit claim progresses through HMRC’s review process.

Once submitted, HMRC will review the claim to assess whether it meets the legislative requirements. This may involve an initial risk assessment followed by a more detailed examination in areas where required. HMRC may accept the claim as filed, raise questions through an enquiry or conclude that some or all of the claim does not qualify as R & D activity.

Where areas of concern are identified, HMRC may adjust the claim to reflect its view of the qualifying position for receiving R&D tax credit relief. In more serious cases, particularly where there is carelessness or deliberate behaviour, penalties can be considered. For this reason, it is crucial that claims are prepared with a clear audit trail and supported by evidence that aligns with HMRC’s legislation.