Why do R&D tax credit enquiries happen?

Since 2022, HMRC has taken a more active approach in regards to compliance for companies claiming R&D tax credit relief. There has been a noticeable increase in the number of enquiries opened, with a greater focus on verifying that claims meet the legislative definition of qualifying R&D activity and that the figures submitted are accurate.

An enquiry from HMRC does not always mean that there is something majorly wrong with the submission of your claim. In most cases, an enquiry forms part of their wider compliance checks. The aim is to test the validity of the claim and to highlight any inconsistencies or areas within the claim that require further clarification.

These are the most common reasons for an enquiry:

• Compliance check to determine eligibility 
• Incomplete documentation 
• Inaccurate claims 
• High expenditure claims 
• Industry specific issues 
• Previous issues 

When an enquiry is opened, HMRC will usually outline the areas of concern and specify the information required to support the claim. This may include requests for further technical detail, clarification of the baseline knowledge, or a breakdown of eligible expenditure. To understand how you can prevent making some of the common mistakes that lead to enquiries.

Submitting clear and accurate responses during the enquiry stage is key. Well-prepared documentation and a consistent narrative can help bring the enquiry to a timely conclusion.

Please feel free to get in touch for further guidance on reducing enquiry risk.