R&D Enquiries Has HMRC raised an enquiry into your R&D Tax claim?
Our enquiry support service
As part of HMRC’s focus on targeting suspected error and fraud amongst R&D Tax relief claims, they have taken a variety of measures to combat this. From added administrative requirements by way of claim notification and additional information forms, to increasing their compliance team to over 200 and sending out ‘nudge letters’ to certain companies prompting them to review the R&D guidance and reconsider their company’s eligibility to claim R&D Tax relief.
The biggest impact of this has been the increase in enquiries into R&D Tax claims, which means that it has never been more important to ensure that not only do you have a robust preparation methodology.
What to do if you have an enquiry?
Firstly its important to identify which department has opened your enquiry as this will impact the best course of action. If the enquiry has come from the ‘Indv and Small Business Compliance’ unit then your letter is likely anonymous with templated questions being raised, the type that type suggest that if a report was submitted it hadn’t been read.
Alternatively, if it has come from the ‘Wealthy/Mid-Sized Business Compliance’ unit then you would have been assigned a caseworker and likely to have specific questions raised based on information contained in your report (assuming one is provided).
If you have been assigned a caseworker, the best starting point is to pick up the phone, introduce yourself and to go through if there are any further or specific concerns they have that may not be apparent from their letter. This will also allow you to discuss how information could be presented to ensure that it is easy and to discuss whether samples might be appropriate if evidence of invoice or cost breakdowns have been requested. This may be sensible if such a request would prompt x100 of documents to be sent across.
The team at Zeal have built up considerable experience in handling enquiries as well as escalating claims through to Alternative Dispute Resolutions (“ADR”) and working towards the Tax Tribunals.
The best place to start is with a call to understand what has taken place to date, whether an enquiry has been ongoing for a while or if one has recently opened. We initially review the key documents and will let you know if we feel we are able to help as there are instances where a claim cannot be defended, such as:
- The R&D activities claimed do not meet the legislation and guidance.
- A computational error. One company had used their losses twice and so were never entitled to the original claim value they were expecting.
- Undertaking work on behalf of a client leading to a subcontracted and subsidised R&D determination. Despite the ruling of Quinn, until this is further clarified by a binding precedent from the Upper Tribunal or Court of Appeal this argument cannot be won within an enquiry. If this is the case you may be able to accept an offer to claim under the RDEC scheme from HMRC.
However, if we are able to assist we will talk you through where we feel our expertise and guidance can help you successfully explain your claim to HMRC. It’s best for us to take complete control over your enquiry but understand that an accountant or some other advisor may be apart of the process and we are naturally able to accommodate this.
We can discuss a variety of commercial terms whether a consultancy hourly rate, fixed fees for specific stages or some other arrangement. We find that the hourly rate is preferred by our clients.
What is the process?
Once we have reviewed all documents, if possible, we will register ourselves as your R&D agent so that we can open a dialogue with HMRC on your behalf.
We’ll also introduce ourselves to your inspector and let them know about our involvement and strategy to address their concerns.
If required, we can provide further information or instead present information in a different format if previous technical descriptions weren’t provided in a format that HMRC prefer.
We can request a technical call with HMRC to discuss any concerns they may have on the projects. In our experience we’ve found this route to be very successful in resolving enquiries swiftly.
If any adjustments are made to the original claim then we will look to understand how the original claim was put together and lead negotiations with HMRC should they wish to discuss raising any penalties.
Following the resolution of your enquiry we can then help you strengthen future claims and improve methodology. This may be relevant if there were any adjustments to your claim or from additional new administrative requirements that have been introduced.
Depending on the outcome of the enquiry, and potentially the size of your claim, we can advise you on other avenues to further defend your claim should their be sufficient merit. This may be appeal, independent review, judicial review, Tax Tribunal or ADR. Multiple may be used and each come with their own pros and cons.
Our Director, Adam Spriggs, has been leading HMRC enquiries into R&D claims for nearly 10 years. During this time he has been able to successfully negotiate a range of enquiries across various sectors. Just a few examples include:
After a couple of letters, HMRC felt a company was undertaking no R&D. Within 8 months 100% of the activity was approved and the enquiry was closed with no adjustment.
An enquiry closed with a company told they undertook no R&D. Following an ADR, 100% of the R&D was approved.
HMRC told a company that the sector that their work was within did not qualify for the relief. Following a call all of the activity was approved.
An inspector ruled no R&D took place and refused to accept a request for a call. Following the raising of a complaint, the case was reallocated and following a call the bulk of the activity was approved.
You might be interested in . . .
Article: Preventing HMRC Enquiries on R&D claims
Download Guide
Everything you need to know about making an R&D claim
Article: What to do if an enquiry is made on your R&D claim
If you would like to discuss how we may be able to help you handle your R&D enquiry then please contact us to arrange an initial consultation
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