If you’re submitting an R&D claim, whether large or small, it’s well known within the industry that HMRC scrutiny has increased significantly over the past five years. For companies that have invested time and resources into legitimate R&D projects, an enquiry is the last thing they want. From our experience working with HMRC during this period, we’ve identified recurring queries that often arise in these enquiries. Below are the most common requests HMRC makes during an R&D enquiry and our understanding of how to approach the response.
1. Can you provide further detailed project plans and timelines, including details of when the uncertainties were identified and overcome?
2. An explanation of what the scientific or technological uncertainties involved in the project were
3. An explanation of what the scientific or technological advance is
4. Describe the baseline in science and technology that the advance sought was being measured against
5. An explanation of the research undertaken to establish these, were uncertainties in the overall field that could not be solved by a competent professional
1. Can you provide further detailed project plans and timelines, including details of when the uncertainties were identified and overcome?
Think of your project timeline as the backbone of your R&D claim. Without it, proving that your work qualifies as genuine R&D, as opposed to routine business tasks, becomes challenging. Project-based R&D is a structured approach with clear goals, dedicated teams, and measurable outcomes. HMRC define a project as follows: “a project consists of a number of activities conducted to a method or plan in order to achieve an advance in science or technology.”
Across the industry, many R&D advisers overlook key details in project plans and timelines. Whilst there’s no way to eliminate the chance of enquiry, ensure your adviser covers the following factors in R&D claims to reduce the likelihood.
- Progression: Evidence how your project advanced over time, setting specific markers to illustrate that it is making an advance in science and technology.
- Resource allocation: Justification for the resources used in your R&D activity.
- Planning and organisation: Demonstrate that your R&D was methodical and planned, not the result of chance.
Clearly detailing project plans and timelines separates genuine R&D from “accidental R&D”, this level of clarity is essential for meeting HMRC’s scrutiny and ensuring the integrity of your claims.
2. Can you provide an explanation of what the scientific or technological uncertainties involved in the project were?
HMRC stress that for any work to be R&D, there must be a level of uncertainty involved. And importantly, that the knowledge is not readily available in the public domain and therefore competent professionals working in this field would be unable to resolve the uncertainty without carrying out R&D. Your R&D adviser should detail the specific scientific or technological uncertainties your project aimed to address, explaining why these challenges were significant and complex, and highlighting the gaps in existing knowledge or technology that your project sought to fill. It’s important to show that these uncertainties aren’t something a competent professional could easily deduce, distinguishing them from routine challenges common to most projects. Demonstrating genuine technological uncertainty reinforces the innovative nature of your work and sets the stage for explaining the approach you took to overcome these challenges.
3. Can you provide an explanation of what the scientific or technological advance is?
How are you advancing a product or service beyond its current capabilities? What activity is being undertaken to progress your product or service? And how does this impact the wider industry? Whilst you wouldn’t share every innovation secret to the wider industry, you must show HMRC how the results of your R&D would have a substantial impact and show a clear advancement compared to when you started your project.
As a minimum, it’s crucial your adviser lays out every single step taken in the R&D process in as much detail as possible. The advance over existing knowledge must be highlighted as a major improvement, not a routine adaptation.
Using DSIT guidelines can help demonstrate how your work aligns with the regulatory and legal frameworks while emphasising its wider industry impact. Whether you’re contributing to reducing carbon emissions within the built environment or developing groundbreaking AI solutions, you must show HMRC exactly how influential your work is.
4. Can you describe the baseline in science and technology that the advance sought was being measured against?
HMRC asks for this information to determine whether a genuine scientific or technological advancement has occurred. They need to understand the state of knowledge in your industry before your project began, as this baseline allows them to assess whether your work represents a technological advancement and establishes a new baseline of knowledge within the sector.
Your adviser should work closely with you to identify the existing science or technology that served as the starting point. Reviewing academic journals and real-world examples can help illustrate the knowledge available at the outset of your project. If your product is entirely novel, your adviser should highlight the closest comparable examples and acknowledge existing methods or processes necessary to develop your innovation. Clearly showing the gap in knowledge that your R&D sought to fill helps HMRC understand the significance and originality of your work.
5. Can you provide an explanation of the research undertaken to establish these were uncertainties in the overall field that could not be solved by a competent professional?
A competent professional is someone suitably qualified or experienced in their field. Based on their knowledge, skills and experience, they will assist with the technically challenging aspects of your work, as well as a project’s routine elements which do not count as R&D. This is a key aspect that HMRC will look for in reports and crops up very frequently in enquiries.
A proficient adviser will clearly differentiate between someone who has an ‘intelligent interest’ in the field and a competent professional, a key point that many reports neglect. Understanding HMRC’s definition of a competent professional is a crucial response to an enquiry. A competent professional should have:
- High level qualifications in the discipline, alongside continuous professional development
- A significant number of years’ experience working at a high level in the field
- Good scientific publication record in their discipline
- Industry awards specific to their sphere
- Any other public recognition for contributions to the field
To further support a competent professional’s involvement, assessing and analysing First Tier Tribunal cases to make direct comparisons and links, demonstrates how you are top of your field. To strengthen this evidence, advisers may analyse First Tier Tribunal cases to draw comparisons and demonstrate that the project team operated at the top of their field. This approach helps establish that the uncertainties addressed in the project were genuinely beyond the reach of a competent professional, reinforcing the legitimacy of your R&D claim.
With growing concerns over the abuse of R&D claims, it’s evident that HMRC has tightened up compliance. In fact, the National Audit Office (NAO), an independent parliamentary body responsible for auditing government departments, has repeatedly raised alarming levels of error and fraud. So much so that HMRC now has over 500 agents working on R&D compliance, compared to approximately 100 in 2020 to 2021. This has enabled HMRC to undertake more compliance checks into claims for R&D reliefs, reflecting the higher error and fraud rates in among SMEs. HMRC has also implemented a random enquiry selection programme, resulting in 17% of all reports being investigated in 2024, a 10% increase on the year before.
Therefore, whilst there is no absolute way to avoid an enquiry, understanding how to tackle the most frequently asked questions, will put you in the strongest possible position to defend your vital R&D claims.
