What’s the best way to avoid HMRC enquiries?

The most effective way to avoid HMRC enquiries is to know exactly what your R&D tax credit claim should contain.

Administrative and company details

Administrative and company details include:

• Employer PAYE reference number
• Company’s UTR
• Business type (SIC code)
• VAT registration number
• Senior internal contact information
• External adviser’s contact details

Technical narrative

The technical narrative should include:

• Baseline knowledge
• Description of the scientific or technological advancement 
• Clear evidence of scientific or technological uncertainties faced that could not be solved by a competent professional
• Evidence of the process to resolve the uncertainty e.g. prototypes or trial periods
• Identification of competent professionals
• The outcome of the project
• Key resources and timeline to establish the scope of the R&D activity

Financial breakdown

When it comes to the breakdown of finances, here are some areas that should be clarified within the R&D claim:

• Staff costs
• Subcontractor costs
• Externally provided workers (EPWs)
• Consumables 
• Software and data costs
• Utilities 

Supporting documentation

Supporting documentation should include:

• Technical documentation
• Financial documentation
• Additional information form

Financial compliance

Lastly, financial compliance is one of the core components of an R&D claim. Documents include:

• Detailed project costs
• Detailed profit and loss statement
• Payroll records
• Activity logs
• Invoices for consumables or softwares directly used in the R&D process
• R&D tax calculation worksheets
• Detailed documentation of any grants or state aid received

 
Accuracy and consistency across an R&D tax credit claim are key to a smooth R&D claim process. Discrepancies between the financial data and the technical description are a common trigger for enquiries. HMRC expects to see a clear alignment between the qualifying research and development activities described and the qualifying expenditure being claimed.

Working with a specialist such as Alexander Clifford can help reduce the risk of enquiry. A structured approach ensures that R&D tax credit claims are prepared in line with HMRC qualifying criteria, with appropriate technical detail and supporting evidence. This improves the quality of the submission and supports HMRC in making an informed decision.