Avoiding the pain of HMRC R&D claim enquiries

As anyone who supports companies in making claims for R&D tax relief will know, the process is in a state of flux right now.  HMRC has greatly increased the number of letters requesting further information for claims, often seemingly at random, and not always having digested all of the information that has been submitted in the claim.  Regardless of any good intentions for this extra level of rigour by the HMRC, it is causing frustration for claimants and those accountants and consultants who are supporting them through additional work and uncertainty.

But there are some things that can be done to reduce the risk and pain around these enquires.  By making a really robust case to start with, you reduce the chance of an enquiry; if you do get one, you are in a much stronger position to defend it and quickly respond; and in the worst case, you can better justify that the claim was submitted in good faith and avoid potential penalties.

A critical part of the submission is the case study – where you have the opportunity to explain why and where there was qualifying R&D.  I’ve seen many instances where just a few lines of generic content have been submitted – and in those cases, I can fully understand why HMRC might want to ask questions.  I also see submissions that are so long or complex that an inspector would not realistically be able to spend the time or get their head around the case study.  And finally, there are those case studies that focus on the wrong things.  For example, focussing on the commercial advance rather than a scientific or technological one – or talking about requirements or design uncertainties – this can suggest a lack of appreciation for the guidelines and what qualifies.

I will delve into specific areas and provide tips in future articles.  But here are some key points:

  • Neither the accountant / consultant, nor the HMRC caseworker are the expert – the claimant’s “competent professional” is.  It is they who make the judgement as to what qualifies against the guidelines within their industry.
  • Make sure that you provide some detail as to why they are qualified (in terms of education and/or experience) to assess that this the work qualifies.
  • Ensure that they understand the key points in the guidelines.  In particular, they can’t make any assessment without understanding that qualifying R&D requires a project to seek a scientific or technological advance, and also requires seeking to resolve scientific or technological uncertainty.
  • Get the level of detail right in the case study.  Too little or too vague may not be enough – too much or too much jargon will likely stop any caseworker in their tracks.
  • Make it clear how the advance seeks to advance science or technology, and what the baseline before this work was – what was the state of play before this project began?
  • Focus on the science and technical aspects – avoid focussing on things like commercial, requirements capture and design aspects – other than setting context, these are irrelevant for demonstrating scientific or technological advances and uncertainties.

How we can help

As a finance professional, and not an expert in your client’s field, you may find it challenging getting across what you need to in the submission.  It can be a challenge explaining what is relevant to the industry experts in a way that is clear to them, and obtaining, digesting and articulating the detail from them.  That is where we can help.

At Articulate R&D, we work with accountants and R&D claim consultants to support the conversations with their clients, explain the relevant parts of the guidelines in their terms, talk tech-to-tech with their competent professionals to enquire about the qualifying R&D they do, and write robust and compelling case studies.  Our consultants have hands-on experience in different industries and years of experience of supporting successful claims and defending enquiries.

Typically, we carry out:

  • Calls with claimants to discuss the guidelines and what is relevant for their specific circumstances (notably their industry and their particular product or service), talking through examples of the types of things we might expect to see that qualify and don’t qualify.  We interview the competent professionals (the experts at the claimant company) to qualify the R&D and obtain the information needed to write a case study.  If needed, we will follow-up with further questions to get the details that are needed.  We facilitate discussions about the apportionment of time and costs to qualifying activities.
  • Writing of a case study to the appropriate level of detail, focussing on the specific areas that the guidelines require and using the right terminology.  We present the work in a case study in a way that best demonstrates why and how it qualifies.
  • Supporting written responses to enquiries when they do occur.  This might simply be reorganising the information in the original case study to fit the structure of HMRC’s questions, or could be facilitating further conversations with the claimant’s competent professionals to obtain further detail for specific questions and writing the response.

Personally, I work across software claims – I have other 20 years experience in the digital and software industries (hands-on coding through to being CTO) and have supported many hundreds of R&D claims over the last 7 years.  But between us, we cover:

Software (software product / service companies, digital agencies, companies developing systems to support their business)

  • Engineering
  • Architecture
  • Product development
  • Construction

Get in touch

I’m always up for a chat, so please get in touch if we can help, or just to share thoughts – it would be great to hear from you.

Philip Clarke
Philip Clarke
Articles: 4