Definition
A compliance check is a formal statutory enquiry into a company's self-assessment return. In the R&D context, it is typically a "partial" enquiry: HMRC opens the compliance check specifically into the R&D claim rather than the whole return. The notice opening the compliance check specifies the aspects of the return under review. HMRC then issues information notices under Schedule 36 Finance Act 2008 requesting the evidence that supports the claim. The company is legally required to provide the requested information within the specified timeframe.
HMRC's guidance on compliance checks is at CIRD Manual. The general compliance framework is covered in HMRC's Compliance Handbook.
What HMRC typically requests
In an R&D compliance check, HMRC typically requests: a description of the specific projects claimed, explaining the uncertainty at the outset; time records supporting the staff-cost apportionment (see vouching standard); invoices for subcontractor and consumables costs; the Additional Information Form if not already submitted; payroll records confirming salary figures; and any technical documentation (design documents, lab notebooks, sprint retrospectives) showing the investigation was genuine.
How a compliance check is closed
A compliance check closes by one of two routes. Either HMRC is satisfied that the claim is correct and issues a closure notice confirming the claim is accepted. Or HMRC concludes that the claim is incorrect and issues an amendment notice that reduces or disallows the claim. If the company disagrees with the amendment notice, it can appeal to the First-tier Tribunal.
HMRC does not have an unlimited period to keep a compliance check open. Case law has established that HMRC must act with reasonable expedition, and if an officer has all the information they need, the company can apply to the tribunal for a direction to close the enquiry.
Common mistakes
The most common mistake is not having an R&D-specialist adviser engaged at the point the compliance check opens. Responding to an officer's information requests without understanding the legal framework can lead to disclosures that concede more than necessary. A second mistake is providing documents in an unstructured way, making it harder for the officer to match costs to projects. A well-organised response that maps each cost to a specific qualifying project is more likely to result in a quick closure.
If you have received a compliance-check notice, the free assessment can connect you to a specialist.