HMRC Enquiry Defence
Navigate HMRC Enquiries with Expert Support!
Facing a HMRC enquiry for your R&D tax relief claim can be a daunting experience. But with a firm that has a deep understanding of both sides of the enquiry process, you can defend your claim with confidence.
Our Head of Compliance brings over 26 years of experience, including time as a tax inspector at HMRC, to provide the expert support you need. Discover the peace of mind that comes with a team dedicated to protecting your benefits
What is an R&D Tax Enquiry?
An R&D Tax Enquiry is a request from HMRC for additional information or clarification on your R&D tax relief application.
It is not uncommon, given the current state of government finances, for HMRC to conduct such enquiries with the primary goal of preventing overclaiming and fraud and examining their own practices.
If there are any issues or concerns regarding your R&D tax relief application, HMRC will typically contact you through a letter. The extent of the enquiry can range from a simple request for additional information to a challenge on the R&D status of your work under the law.
In some cases, HMRC may reject your claim, impose fines for carelessness, and demand payment of any back-owed R&D tax claims plus interest. To ensure that your claims are sturdy and compliant, it is crucial to work with a trustworthy provider of R&D consultation.
Why does HMRC open an enquiry?
HMRC may launch an investigation into your company’s finances for various reasons such as a shift in circumstances, a reorganization of the company, an issue with necessary paperwork, or an increase in the value of your R&D tax credit claim compared to previous years.
They may also focus their inquiries on a specific sector or category of technologies as a precautionary measure.
Reasons for HMRC to investigate can include:
- Insufficient explanation of the scientific or technological advancement achieved in R&D activities.
- Lack of clarity regarding scientific or technological uncertainties encountered during the R&D project.
- Inadequate explanation of the timing and manner in which the uncertainties became known.
- Lack of evidence to support why information was not obvious to qualified experts.
- Inconsistencies in the R&D tax credit claim such as errors or incompleteness.
- Concerns raised by the tax return.
- Exceeding permissible expenditures listed in company books for tax purposes.
- Incorrect allocation and limitation of costs for hired help and personnel from third parties.
- Attributing R&D expenditures to work performed by personnel not directly supported by the company’s R&D efforts.
- Not listing all personnel involved in R&D operations.
- Tax return filing or amendment errors.
- Insufficiently qualified personnel responsible for evaluating the R&D project’s compliance.
Why has there been an increase in R&D Tax credit enquiries?
Due to the recent rise in fraud and abuse of R&D tax credits, HMRC has strengthened its internal compliance team to scrutinize claims more closely. While many enquiries may be regular spot-checks or requests for additional information, others may be due to concerns of bogus claims.
An HMRC enquiry can cause significant delays in payment and even result in reduced claims or penalties. That’s why it’s important to have your claims reviewed by experts like Bonham & Brook. Our team can help reduce the length of the enquiry process and minimize its impact on your business.
Additionally, HMRC has been known to focus their enquiries on certain sectors, industries, and regions as part of its risk management strategy. As a result, companies of different sizes and in different industries may face more scrutiny at different times.
By working with Bonham & Brook, you can ensure that your R&D tax credit claims are submitted correctly and with all the necessary supporting documentation, reducing the risk of an enquiry and helping you receive the maximum benefit from the incentives available to you.
Possible Outcomes of an HMRC R&D Tax Credit Enquiry
- No changes were needed to submit the R&D claim.
- Adjustments were made to the initial R&D claim submission, which results in a lower final R&D claim amount.
- Denial of the R&D Tax Credit Claim
Our R&D Tax Credit Enquiry Defense process
We understand that facing an HMRC enquiry can be daunting. That’s why we’re here to help.
Our team consisting of an ex-HMRC inspector and tax experts will guide you through the process to ensure compliance, maximize your claim, and maintain a smooth ongoing relationship with HMRC.
Step 1: Initial Review. We’ll assess the chances of success and thoroughly review relevant documents before starting work.
Step 2: Claim Verification. We’ll examine your past R&D expenses and gather evidence through document audits and interviews.
Step 3: HMRC Prep & Response. We’ll provide additional information and prepare for written and direct communication with HMRC. We’ll also support conference calls and in-person meetings.
Step 4: Resolution & Ongoing Support. We’ll handle all necessary paperwork and provide ongoing support until the investigation is resolved. Our goal is to ensure a smooth and stress-free process for you.