How to Deal with a Compliance Check on Your R&D Tax Credits Claim

It can be very worrying to find out that your R&D tax credit claim has been put under review by HMRC R&D Tax Credit Compliance Officers, but this isn’t necessarily a sign that you need to panic. Indeed, just because you are being investigated for compliance, it may be a result of random selection, and there may not be any discrepancies or red flags raised.

In any case, you need to handle your R&D tax credit claim compliance check the same way – so in this blog, we’ll look at the best ways you can respond to a compliance check in order to move through the process as smoothly as possible.

Why is a Compliance Check Being Carried out on your R&D Tax Credit Claim?

HMRC checks a large number of its R&D tax credit claims. Some are the result of red flags or issues being raised against the claim, while others are simply randomly selected to check for correct compliance. These checks are necessary to ensure that fraud isn’t taking place and to ensure that the correct amount of money is being paid out.

How HMRC operates in this regard is at their own discretion, so it may be that all claims within a specific sector are being investigated, or that all new claims are investigated by default. Don’t panic and assume this means that your claim is incorrect.

If Hamlyns were involved in your R&D tax credit claim and it is under investigation, we will work with you throughout the process to ensure a quick and easy resolution.

How Does the Compliance Check Work?

You will receive a notification from HMRC that your R&D tax credit claim is subject to a compliance check. This notification will usually come via your accountant, and will be in the form of a letter that will lay out:

The process of the check
An explanation of why the check is being carried out
What they are checking
What will happen when the checks are complete

You should read through this letter carefully as it will also contain important deadlines to consider. Following this introductory letter, you will receive a more specific and detailed letter on what you will need to provide to the Compliance Officer. This will generally include:

Details on the R&D work you carried out and how it qualified for R&D tax relief
A detailed breakdown of R&D project costs

You should be completely open and honest with the Compliance Officer, providing all of the necessary information within the provided deadline. You can let the Compliance Officer know if you need more time, or if you can’t provide some of the information requested.

What Happens Once the Check is Complete?

Once the check is complete, the Compliance Officer will get in contact with you to explain whether they are satisfied that everything on your R&D tax relief claim is correct, and then advise you whether you need to pay more tax or if HMRC needs to repay any tax to you.

If you would like to work with an experienced accountant on any R&D tax-related issue, please get in contact with our experienced team today.