HMRC R&D Tax Enquiries: What To Expect

About 20% of R&D tax credit claims will be subject to a HMRC enquiry. Find out what you can expect from an enquiry.

In 2025, the landscape of R&D tax credit claims has evolved and become much more demanding. HMRC has implemented rigorous compliance measures and reforms, which has led to a significant increase in enquiries. In fact, HMRC now checks 20% of all R&D tax credit claims, which is 5 times more than they did in 2022. If your business relies on R&D tax credits, it’s crucial to understand the reasons behind enquiries and mitigate associated risks.

Whereas in the past, claiming without specialised support may have sufficed, increased compliance measures and scheme reforms have added complexity to the process. Considering this, it is crucial to evaluate the effectiveness of your claims process and contemplate partnering with a dedicated R&D advisor. This collaboration can assist in reducing the likelihood of protracted HMRC enquiries and helping to ensure timely receipt of the credits that you rightfully deserve.

What is an HMRC R&D tax enquiry?

An R&D tax enquiry is when HMRC reviews your R&D tax claim to check that it meets compliance standards. This may involve requests for further information, clarification, or even a full investigation into your R&D activities and costs.

Things you should know:

• HMRC doesn’t “approve” claims just because they process them. Even after payment, claims can still be reviewed.
• Some claims are reviewed before payment, others after.
• HMRC has dedicated R&D compliance teams handling these enquiries.

What happens after an enquiry is opened?

• Step 1: You receive a letter from HMRC stating that they are reviewing your claim.
• Step 2: You have 30 days to provide any requested information (you can request an extension if needed).
• Step 3: HMRC reviews your response – this may involve multiple rounds of questions.
• Step 4: A decision is made – HMRC may approve your claim, reduce the amount, or may deny it entirely.

How long does a R&D tax enquiry take?

A standard HMRC R&D enquiry takes 6-12 months, but more complex cases can take longer.

The state of R&D tax credit enquiries

The surge in HMRC enquiries

HMRC’s latest Annual Report and Accounts for 2023-24 show that while the number of R&D tax credit enquiries has decreased, the rate of error and fraud remains high. The SME scheme experienced a particularly high level of error and fraud at around 14.6%. However, the RDEC Scheme for larger companies shows a lower rate of fraud and error at 2.8%.

Understanding HMRC’s motivation

The prevalence of error and fraud, especially in the SME scheme, is a systemic problem that HMRC is in the process of addressing. Non-compliance, whether unintentional or deliberate, undermines the effectiveness and credibility of the R&D tax relief scheme. By conducting thorough investigations, HMRC aims to ensure genuine innovators receive R&D tax credits.

Findings from HMRC’s Mandatory Random Enquiry Programme (MREP2)

The Mandatory Random Enquiry Programme, which covered claims for the 2021-22 tax year, shows the huge variation in compliance rates by claim size. For claims of more than £1 million the compliance rate was 75%, and for claims of under £ 1 million, it was 29-58%.

Some of this non-compliance is down to unscrupulous advisors who previously encouraged non-qualifying companies to make claims. However, a big chunk is also down to small companies with limited resources who are struggling with the complexity of the claims process. Many SMEs who are carrying out genuine R&D are being caught out by the tighter compliance standards and longer enquiry periods.

MREP2 also shows that even experienced claimants are struggling with compliance, with 24% of their claims being partially non-compliant. This means HMRC’s changing standards are affecting all claimants and not just first time claimants. For this reason, it’s more important than ever to review your claims strategy and to work with an R&D advisor.

Evolving compliance policies and their impact

To tackle this issue, several policy changes have been put into effect. From 1 April 2024, the SME and RDEC schemes have been replaced by a merged R&D scheme which is modelled after the RDEC scheme, which has historically seen less error and fraud. 

Furthermore, in August 2023, the claims process was changed with the introduction of the Additional Information Form (AIF). This form requires detailed financial and technical documentation, ensuring greater transparency and accountability.

To enhance effectiveness, HMRC has also implemented various operational changes, such as doubling its R&D compliance staff and establishing an R&D Anti-Abuse Unit to proactively detect and prevent fraudulent activities.

Policy changes have a complex impact. While their goal is to improve compliance and reduce fraud, they also complicate the claims process. Companies must navigate more regulations and documentation requirements, requiring a deep understanding of tax laws and meticulous claim preparation.

To avoid prolonged enquiries, delayed credit receipt, and financial penalties, businesses must ensure their R&D tax credit claims are compliant, well-substantiated, and aligned with HMRC guidelines.

The role of expert R&D specialists in ensuring compliance

Expert guidance is crucial for receiving R&D tax credits. Specialised R&D advisors play a vital role in interpreting regulations, guiding businesses, and ensuring compliance with HMRC standards. This partnership mitigates risks, reduces enquiries, and ensures timely receipt of R&D tax credits.

In 2025, the role of an R&D agent is crucial in guiding companies through HMRC’s rigorous R&D tax credit claims process. The landscape has shifted from minimal documentation to a more stringent environment where accuracy is paramount. This has redefined the R&D agent’s role as an advisor and strategic partner in ensuring compliance and handling potential enquiries.

They should ensure that all aspects of an R&D claim align with HMRC’s requirements, including the technical narrative and financial details. Expertise lies in detailing scientific or technological advancements, demonstrating compliance with HMRC guidelines, and ensuring accountability.

The experience of an R&D agent in managing HMRC enquiries is also valuable, demonstrating expertise and reliability. Working with an R&D advisor that has a successful track record in handling enquiries provides added assurance. Ask for information about the advisor’s enquiry and success rates, if the figure is not readily accessible on their website.

In essence, an R&D agent should combine compliance expertise, strategic advice, and defence against enquiries, supporting clients throughout the HMRC review process.

Strategies to avoid HMRC enquiries in R&D tax credit claims

Navigating the complexities of R&D tax credit claims requires a strategic approach to minimise the risk of HMRC enquiries. Companies must focus on accuracy, compliance, and the expertise of R&D advisors. Here are key strategies to avoid enquiries:

1. Choose an experienced and reputable advisor: It’s crucial to select an advisor with both experience and a solid reputation. The track record of an advisor in handling R&D tax claims and enquiries is pivotal in ensuring accurate preparation and scrutiny from HMRC. To evaluate options, refer to our guide on selecting the right R&D advisor.
2. Accurate representation of R&D costs: It is essential to accurately represent R&D costs. Including marginal or non-R&D costs can raise red flags. Seek advice on what costs qualify for your specific industry and/or activity and adhere strictly to these guidelines.
3. Keep up to date R&D records: Keeping contemporaneous records of R&D activities, costs and justifications is key. Using project management and accounting tools like Trello, Jira and Xero can help record keeping by having all documentation – time logs, invoices, technical reports and cost breakdowns – at your fingertips if an enquiry arises.
4. Create a culture of compliance: Having everyone in your business understand the importance of R&D claims will reduce the risk of errors. Train your finance, technical and management teams on the eligibility criteria, record-keeping best practices and HMRC’s expectations so you don’t make costly mistakes. Having an internal review process will help compliance.
5. Precision in financial reporting: Ensuring that the numbers in your claim are correct is crucial. Errors or misrepresentations in financial data can lead to enquiries. Double-checking and verifying all financial information before submission is a prudent practice.
6. Avoid overclaiming on costs: Be cautious not to claim 100% on individual R&D costs unless they are fully justifiable and include contemporaneous documentation e.g. timesheets and invoices. Overclaiming can be perceived as an attempt to inflate the value of the claim and may trigger an enquiry.
7. Inclusion of a clear technical narrative: Include a technical narrative that clearly articulates the scientific or technological advances made in the industry. This narrative should explain how your project meets the R&D criteria, detailing the uncertainties encountered and how they were addressed. This task should be carried out by a competent professional: preferably, the individual who spearheaded the R&D project and who is most capable of explaining the project.
8. Review and discussion before submission: Before submitting the claim, thoroughly review and discuss the report with your advisor. This review process will help to catch any potential issues that could lead to an enquiry and will ensure that your claim is as strong as possible.
9. Acceptance of the enquiry possibility: Finally, understand that enquiries can still happen despite taking all the right steps. They are part of the landscape of R&D tax claims. Having a mindset that anticipates and is fully prepared for this possibility can help in dealing with any enquiries that arise effectively.

Implementing these strategies can significantly reduce the likelihood of an enquiry into your R&D tax credit claim. Remember, the key is in the details and having the right expertise to guide you through the process.

What are the most common reasons for disputes or enquiries?

Enquiries can be triggered by:

• Errors in your claim – Missing evidence, vague technical explanations, or incorrect financial data.
• Random selection – HMRC runs a Mandatory Random Enquiry Programme (MREP2) where claims are selected at random for checks.
• Industry risk – Certain SIC codes (industry classifications) are flagged for higher scrutiny due to previous non-compliance.
• Suspicious trends – A sudden spike in R&D spending or an amended claim for a higher amount can raise questions.
• Advisor history – If your R&D advisor has a record of non-compliant claims, HMRC may investigate claims prepared by them.
• Wider tax checks – If HMRC is reviewing your corporation tax return, they may also check your R&D claim.

Why work with EmpowerRD?

EmpowerRD offers comprehensive support for R&D tax claim enquiries, ensuring a smooth and compliant process. Our services include:

1. Standard enquiry support: Our service includes standard enquiry support, making it hassle-free for our clients.
2. Experienced team: Our Enquiry Response team comprises individuals with extensive expertise.
3. Intuitive platform: Unlike traditional advisors who use spreadsheets and email chains to compile a claim, our platform consolidates all data, finances, and documentation in one place. This organised approach ensures a centralised data trail, making claim defence more efficient and robust.
4. Client communication: We inform our clients at every stage of the enquiry process, ensuring transparency.
5. Data management: We ensure that your claim report contains sufficient information and, if necessary, work closely with clients to gather additional data.
6. Direct HMRC communication: EmpowerRD handles all communications with HMRC, simplifying the process for our clients.

In 2024, EmpowerRD maintained an impressively low enquiry rate of under 5%. This is over 4 times lower than the industry average of 20%. 

Trusted Partner for R&D Tax Claims:

EmpowerRD has assisted over 1200+ UK companies in building optimised and compliant R&D tax claims totalling over £250 million. Our experts are here to support your business. Contact us today if you have any questions.