Definition
An HMRC enquiry is a formal investigation into a corporation tax return, opened under paragraph 24 of Schedule 18 to Finance Act 1998. For R&D tax relief, enquiries typically focus on whether the claimed activities meet the BIS definition, whether the competent professional has been correctly identified, and whether the expenditure is qualifying and accurately apportioned. HMRC's R&D compliance activity increased significantly from 2022 with the creation of a dedicated R&D Anti-Abuse Unit.
How HMRC defines it
The statutory basis is at paragraphs 24 to 37 of Schedule 18 to Finance Act 1998, with specific R&D procedures set out in HMRC's Enquiry Manual from EM2000 onwards. HMRC's published Guidelines for Compliance GfC3, titled Help to see if your work qualifies as R&D for tax purposes, describes the information HMRC expects to see. Mandatory random enquiry volumes were increased in 2023.
Practical example
A software SME receives a formal enquiry letter nine months after filing its CT600. HMRC requests project descriptions, the competent professional's CV, cost breakdowns and a response to specific queries on the qualifying expenditure categories. The enquiry is handled by the specialist adviser and resolved over a period of several months, with most of the claim upheld.