- By Dov Paluch | Director, Catalyst Solutions
Getting your R&D tax claim accepted by HMRC is not the same as having a claim that will hold up when questioned. Many businesses never think about the difference until an enquiry letter arrives.
In 2021/22, HMRC had 100 staff working on R&D tax compliance. According to HMRC’s Annual Report and Accounts 2024 to 2025, that number had grown to over 500. With more people comes better data, and a systematic effort to identify claims that don’t stand up to scrutiny.
HMRC investigating your R&D claim is no longer the unlikely scenario it once was. The more pressing question is whether your claim will hold up when it happens.
Here’s what actually triggers an HMRC R&D tax enquiry and what it reveals about how claims should be built in the first place.
HMRC’s R&D compliance activity has two goals. The first is straightforward: identify and recover tax relief that was claimed incorrectly or fraudulently. The second is less obvious: improve the data HMRC holds on error and fraud so it can target future checks more accurately.
This second goal matters because it means HMRC’s checks are getting smarter over time. The additional information form (AIF), mandatory since August 2023, gives HMRC structured data on every claim. The pre-notification requirement adds another layer. Each of these reforms gives HMRC more to work with when assessing risk.
Being compliant and being investigated are not the same thing. Legitimate claims get questioned. Well-prepared businesses still receive enquiry letters. What separates them from businesses in serious difficulty is whether the claim can be properly evidenced and explained when the questions come.
HMRC selects claims for compliance checks through a combination of random sampling and targeted risk assessment. Both matter, and both are worth understanding.
A proportion of R&D claims are selected for review entirely at random. This is by design. HMRC uses random sampling to build a more accurate picture of the error and fraud rate across the entire claims population, data it then uses to refine its risk models.
There is nothing you can do to avoid a random check. A well-prepared claim selected at random will face exactly the same questions as any other. What matters is whether your documentation, technical narrative, and cost allocation can support your claim under questioning.
HMRC targets certain sectors based on their Standard Industry Classification (SIC) code. Sectors where HMRC has seen a high volume of questionable claims, or where technological R&D is less common, receive more attention.
HMRC does not publish the list of targeted SIC codes, deliberately, to prevent businesses from changing codes to avoid attention. If your company operates in a sector where R&D claims have historically been abused, your baseline risk of a compliance check is higher.
HMRC holds a significant amount of data about your business from corporation tax returns, VAT records, PAYE submissions, and Companies House filings. If information in your R&D claim doesn’t reconcile with data from these other sources, it creates a flag.
Common inconsistencies include R&D staff costs that don’t align with your payroll data, claimed expenditure that doesn’t appear in your accounts in an expected way, or project descriptions that don’t match the nature of your business as filed at Companies House.
If your R&D expenditure increases substantially year on year without a clear explanation in your supporting information, HMRC is likely to want to understand why. The same applies if you amend an existing claim to increase its value.
This doesn’t mean you shouldn’t claim for increased R&D activity. It means the increase needs to be clearly explained and properly evidenced.
Since August 2023, all R&D claims require a mandatory additional information form to be submitted before the claim is filed. The AIF gives HMRC structured information about your projects, costs, and qualifying activities.
If your AIF contains inconsistencies, is submitted in the wrong order relative to your tax return, or lacks the required level of detail, HMRC may open an enquiry or in some cases reject the claim outright without one. Not providing information on enough projects as required by legislation, is the kind of basic error that draws immediate attention.
HMRC doesn’t always open an R&D enquiry because of a concern with the R&D claim itself. If HMRC has questions about another aspect of your corporation tax return, it’s common for the R&D claim to be reviewed at the same time. Your R&D claim can become part of a broader compliance check even if the original trigger had nothing to do with R&D.
The first sign of an enquiry is a letter from HMRC confirming they are conducting a compliance check on your R&D claim. This letter will typically include a request for specific information and set a response deadline, usually 30 days from the date of the letter. In practice, you often have less time than that once the letter arrives by post.
HMRC has several dedicated units handling R&D enquiries. Individuals and Small Business Compliance (ISBC) operates a high-volume, desktop-based approach — fast, structured, and focused on speed. Wealthy and Mid-sized Business Compliance (WMBC) tends to be more detailed, often involving calls with your technical team. Large Business operates differently again, typically with a Customer Compliance Manager coordinating the process.
The experience varies significantly depending on which unit is handling your case. What doesn’t vary is the need to respond thoroughly, quickly, and with well-organised evidence.
HMRC’s documentation requests during an enquiry typically cover two areas: technical evidence and financial evidence.
Technical evidence may include:
Financial evidence may include:
There is no fixed list of what HMRC will request. It depends on the specific concerns raised. What matters is whether your documentation exists, is organised clearly, and genuinely supports what you claimed. Unordered or incomplete responses are one of the most common reasons enquiries escalate rather than close.
When a claim is questioned and the supporting evidence isn’t there, the issue usually isn’t the R&D itself. The underlying work was genuine. What went wrong is how the claim was constructed.
Claims that are built from the top down, instead of the bottom up tend to have the same weaknesses. The documentation doesn’t match the narrative. The cost allocation can’t be traced to specific qualifying activities. The technical descriptions are generic rather than grounded in what the team did.
A claim like this can sail through submission. HMRC processes it, the money arrives, and everything looks fine. The problem surfaces later, when a compliance check asks questions that the documentation can’t answer.
A claim that will hold up under HMRC questioning is built differently from one that’s simply designed to be submitted. The difference comes down to how the claim was constructed in the first place.
A defensible claim starts with genuine technical understanding, not a generic questionnaire filled in by a finance team under time pressure. It requires someone who can talk to your in-house experts in their own language, understand what uncertainty they were working to resolve, and translate that into a clear technical narrative that satisfies HMRC’s definition of qualifying R&D.
Cost allocations need to be traceable directly back to specific qualifying activities, not broad estimates applied retrospectively.
The documentation needs to be built to support future explanation, not just to satisfy filing requirements at the time of submission.
The test we apply to every claim we build is straightforward: could someone who wasn’t involved in preparing this claim explain and defend it clearly, years from now? If the answer is no, the claim isn’t ready.
If you want to assess how your existing R&D claim would hold up under an HMRC compliance check, start here:
If any of these give you pause, it’s worth reviewing your claim before HMRC does.
Don’t ignore it and don’t underestimate the timeline. Companies frequently misjudge how much information HMRC will need and how long it takes to pull together properly. Missing deadlines or providing disorganised responses makes the situation worse.
If your original claim was prepared by an advisor and you’re now facing an enquiry, it’s worth considering whether you’re getting the level of technical support the situation requires. Whoever handles the enquiry response needs to understand both the technical content of your R&D and how HMRC approaches compliance checks.
A typical WMBC or Large Business enquiry runs for six to twelve months at minimum, with multiple rounds of correspondence before a resolution is reached. Building a clear, well-organised response from the outset and maintaining a cooperative approach with HMRC throughout makes a material difference to the outcome.
HMRC investigations into R&D tax claims are not rare events that happen to careless businesses. They happen to good businesses with legitimate claims because HMRC is checking more, working with better data, and getting sharper at identifying which claims to look at.
A claim that was built properly from the start – grounded in technical understanding, properly documented, with costs that trace back to specific activities – is a claim you can defend, whether the questioning comes next month or years from now.
That’s the standard worth building to.
About the author
Dov Paluch is a director at Catalyst Solutions, a multi-disciplinary R&D tax advisory firm serving innovative businesses across the UK, South Africa, Australia and Germany. The Catalyst Solution’s team includes accountants, lawyers, engineers, and scientists and is built on the belief that the only R&D tax claims worth building are those you can confidently explain years later.
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