An HMRC R&D tax enquiry is a formal compliance check under Schedule 18 Finance Act 1998 into a company's R&D Expenditure Credit or Enhanced R&D Intensive Support claim. HMRC has 12 months from the date of filing a company tax return to open an enquiry. After that window, they need a discovery assessment. In 2023-24, HMRC's R&D Compliance team processed approximately 9,700 compliance checks (HMRC Annual Report 2023-24). Knowing what flags a claim is not paranoia; it is preparation.
How HMRC Selects Claims for Enquiry
HMRC uses a combination of automated risk-scoring and manual review to select R&D claims for compliance checks. The automated element runs through HMRC's Connect platform, which cross-references company data including accounts filed at Companies House, payroll records, VAT returns, and sector benchmarks.
Manual review is carried out by specialist R&D units. HMRC set up dedicated R&D compliance teams following the 2023 Compliance Action Plan, which committed additional resources specifically to R&D fraud and error. The 2024 HMRC Annual Report confirmed that compliance yield from R&D interventions had increased materially compared to 2022.
The key risk categories that HMRC has published or signalled in tribunal decisions and correspondence include the following.
Additional Information Form Quality
The Additional Information Form has been mandatory since August 2023. HMRC processes it before releasing the tax relief. A claim submitted without an AIF is invalid. But a claim with a weak AIF carries a different kind of risk: it signals to the reviewer that the technical substance may not stand up to scrutiny.
Specific AIF weaknesses that correlate with enquiry selection include:
- Project descriptions that use generic language without naming specific technical uncertainties.
- Cost schedules that do not reconcile with the payroll figures in the company's accounts.
- Claims where the number of qualifying employees appears inconsistent with headcount in Companies House filings.
- Narratives that describe commercial outcomes rather than technical challenges.
- Projects described in identical language across multiple companies, suggesting template-driven filing by an adviser.
HMRC's R&D Compliance team has stated publicly that the quality of the AIF is now the first screen they apply. A well-written AIF, even for a large claim, reduces the likelihood of being selected for a detailed check.
Statistical Outliers Against Sector Benchmarks
HMRC's Connect system compares claims against statistical benchmarks for each sector. A software company claiming R&D expenditure equivalent to 80% of turnover will be identified as an outlier against typical patterns for that sector. This does not mean the claim is wrong; some genuinely R&D-intensive businesses do spend at those levels. But it does mean the claim will receive additional scrutiny.
The sectors where HMRC has historically seen the highest volume of irregular claims, based on published statistics and tribunal patterns, include:
- Software development and IT consultancy, particularly claims involving routine software integration.
- Construction and civil engineering, where the line between technical uncertainty and standard professional practice is contested.
- Food manufacturing, where product reformulation claims vary widely in quality.
Use our eligibility checker to benchmark your qualifying spend against typical sector ranges before submitting. A claim that looks unusual on the face of it should have a clear explanation in the AIF.
Adviser Risk Patterns
HMRC monitors adviser behaviour. Under the Agent Strategy published in 2023, HMRC identified a cohort of high-volume R&D advisers whose claims showed systematic patterns associated with error or fraud, including high disallowance rates, identical project descriptions across clients, and claims in sectors with no plausible R&D activity.
If your adviser is on HMRC's watch list, your claims may receive heightened scrutiny regardless of their individual merits. This is one reason that adviser selection matters beyond the fee structure. Our adviser comparison guide covers what to look for in an HMRC-registered specialist.
Adviser-linked enquiries: what to do
If you received an enquiry letter that references your adviser by name or refers to a group of claims filed by a particular firm, seek independent specialist advice promptly. These are often handled differently by HMRC's specialist compliance teams and may require a separate response strategy from a standard individual claim enquiry.
First-Time Claimants and the CNF Requirement
The Claim Notification Form, introduced for accounting periods beginning on or after 1 April 2023, must be filed by most first-time claimants and by companies that have not claimed in the previous three years. The CNF deadline is the same as the company tax return deadline: 12 months after the end of the accounting period.
If a company misses the CNF deadline, the R&D claim for that period is inadmissible regardless of whether the underlying activities would otherwise qualify. There is no late filing mechanism. See our dedicated post on the CNF exemption trap for the detail on who is and is not exempt.
First-time claimants who do file the CNF correctly still carry higher enquiry risk simply because HMRC has no prior claim history to compare against. A strong AIF is especially important for a first claim.
Claim Timing and Size
Claims filed very close to the two-year amendment deadline may attract more scrutiny than those filed promptly with the company tax return. Late or amended claims suggest the claim was not part of the original return preparation process, which raises questions about documentation quality.
Claim size matters in context. A £1 million RDEC claim from a company with £2 million turnover will look different from a £1 million claim from a company with £20 million turnover. Connect's benchmarking is proportional, so absolute claim size is less important than claim size relative to company financials and sector norms.
Substantial Changes Between Accounting Periods
A claim that is materially larger than the previous year's claim for the same company will attract attention. A 200% increase in qualifying R&D expenditure year on year, without a corresponding change in headcount, revenue, or project scope, is a pattern that HMRC's Connect system flags automatically.
Where a genuine increase has occurred, for example because the company hired materially more technical staff or took on a major R&D project, the AIF should explain the change explicitly. Do not assume HMRC will infer legitimate growth from the numbers alone.
Reducing Your Enquiry Risk Without Reducing Your Claim
The goal is not to claim less. It is to claim accurately and document well. Every pound of legitimate R&D expenditure you leave out is a pound of relief you have written off. The goal is to make a claim that is accurate, well-supported, and easy for HMRC to verify.
Specific steps that reduce enquiry risk:
- File the CNF on time if you are required to.
- Write specific AIF project descriptions that name the technical uncertainty, the baseline of knowledge at the start of the project, and the experiments or iterations undertaken.
- Ensure your cost schedule reconciles with payroll records and subcontractor invoices.
- Retain contemporaneous records including timesheets, version control logs, meeting notes, and test results.
- Use a specialist adviser who has a track record with HMRC rather than a high-volume generalist.
Our HMRC enquiries guide covers what happens once an enquiry opens, including the information notice process and typical timelines. Understanding qualifying expenditure categories in detail also reduces the risk of including costs that will not survive scrutiny.
Frequently Asked Questions
No. HMRC opens formal enquiries on a fraction of the approximately 65,000 claims filed each year. Risk-scoring is partly automated through Connect and partly manual review by specialist R&D units. Claims that pass the initial risk screen are processed and paid without a formal enquiry.
The Additional Information Form has been mandatory since August 2023. HMRC uses it to risk-score claims before processing. Generic project descriptions, vague technical narratives, and cost schedules that do not reconcile with the company tax return are all signals that increase the probability of a formal enquiry.
First-time claimants are subject to additional scrutiny. The Claim Notification Form, required for most first-time claimants, must be filed before the company tax return deadline. Failure to file the CNF on time makes the claim inadmissible regardless of its technical merits. First-time claimants who do file correctly still carry higher risk because HMRC has no prior claim history to compare against.
Claim size relative to company financials and sector norms is a risk factor. Connect compares claims against sector benchmarks. A claim where R&D costs are a very high proportion of turnover will look statistically unusual even if the underlying facts are legitimate. The AIF should explain any unusual ratios explicitly.
HMRC has 12 months from the date the company tax return is filed to open an enquiry. After that window, they can only raise a discovery assessment, which requires showing that information was not available during the enquiry window. For late-filed returns, the 12-month window runs from the actual filing date.
Build a Claim That Passes the Risk Screen
Uplift Tax works with HMRC-registered specialists who prepare claims built to withstand scrutiny. The assessment is free. If the claim does not proceed, there is no fee.
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