Definition
Under section 28A of the Taxes Management Act 1970, when HMRC completes a compliance check it issues a closure notice stating its conclusions. Where HMRC concludes that additional tax is due (because the R&D claim is overstated), it issues an amendment to the company's return alongside the closure notice. This is the amendment notice. It specifies the amount by which the claim is reduced and the additional corporation tax due, together with any interest on late-paid tax.
The amendment notice is distinct from a penalty notice, which is a separate document and has its own appeal procedure. An amendment to reduce the claim does not automatically carry a penalty, unless HMRC concludes there was a careless or deliberate inaccuracy. See HMRC Disclosure for how penalties are calculated.
The appeal process
A company that disagrees with an amendment notice must give HMRC written notice of appeal within 30 days of the amendment. The appeal is initially to HMRC itself (a review by a different officer). If the company remains dissatisfied after the HMRC review, it can appeal to the First-tier Tribunal (Tax Chamber). Tribunal hearings for R&D cases are heard before specialist judges and often involve expert technical evidence.
Before appealing, the company can apply for postponement of any tax payment pending the appeal. This prevents HMRC from collecting the disputed amount while the appeal is progressing, provided the grounds for postponement are reasonable.
Settling versus appealing
Many compliance checks are resolved through agreement rather than a formal appeal. If the company accepts some or all of HMRC's position during the compliance check, the parties can agree a reduced claim before a formal amendment notice is issued. This is often faster and avoids tribunal costs. The amendment notice becomes relevant only when the parties cannot agree and HMRC issues it as the formal closure mechanism.
Cases like Get Onbord Ltd ([2024] UKFTT 617 (TC)) show that appeals can succeed at the tribunal level even after an amendment notice has been issued, but taking a case to tribunal requires careful preparation and usually a specialist R&D adviser.
Common mistakes
The most common mistake is missing the 30-day appeal deadline. Unlike some other HMRC processes, there is no statutory discretion to extend this window without applying to the tribunal for permission, which is granted only in limited circumstances. A second mistake is paying the additional tax shown in the amendment notice without lodging an appeal, in the belief that this avoids penalties. Paying does not stop time running for the appeal; the deadline is still 30 days from receipt of the notice.
If you have received an amendment notice and are considering an appeal, a specialist assessment can help you evaluate the merits before the deadline passes.