What happens after you submit an R&D tax relief claim

After you submit an R&D claim, HMRC processes it, usually within about 40 days, then either pays or offsets the credit, or opens a compliance check. In 2023 to 2024, HMRC says it processed 92% of claims within 40 days. A minority are selected for a check, which can delay payment and took 246 days on average to complete. Payment is not approval: HMRC can still examine a claim after paying it.

This guide follows a claim from filing to cash, and sets out what to do if HMRC writes.

What has been submitted

An R&D claim is made in the Company Tax Return, supported by the additional information form, and where required a claim notification. The sequence is set out in our guide on how to claim. HMRC uses the additional information form and the figures in the return to assess risk, which it describes as a mandatory part of making an R&D claim. If a form is missing, the claim is not accepted.

Step 1: HMRC processes the claim

Most claims are processed without a check, and for those the credit is paid, or applied against what you owe, once processing is done. HMRC's publication on its approach to R&D reliefs for 2023 to 2024 says it processed 92% of claims within 40 days, beating its own target of 85%. That was published on 30 October 2024, and it is the latest processing figure we have verified.

HMRC says its compliance checks are "proportionate to the risk and the customer behaviour". Complete, consistent forms and a credible technical case help your claim go through. Generic project descriptions and figures that do not match across documents do the opposite.

Step 2: how the credit is paid or set off

For the merged scheme, section 1042I of the Corporation Tax Act 2009 sets out the order. In summary:

1. The credit first reduces the company's Corporation Tax for the period.
2. A notional tax deduction is applied.
3. The PAYE and National Insurance cap is applied. See our page on the merged scheme.
4. What is left goes towards Corporation Tax for other periods.
5. In a group, the company may surrender the remainder to another member.
6. Any balance then pays other sums the company owes HMRC.
7. Whatever remains is paid to the company.

ERIS credits are paid under section 1054, which also says HMRC must pay the credit to the company.

Two points catch people out. First, the company's own tax debts come out of the credit before any cash arrives. Second, HMRC has said R&D agents can no longer receive their clients' R&D payments through the nominations process, so payment goes to the company.

When payment can be held back

Section 1112H of the Corporation Tax Act 2009 allows HMRC to withhold payment in two cases:

• An enquiry has been opened into the return for the period. HMRC need not pay the amount, although an officer may make a provisional payment of whatever amount they think fit.
• PAYE or Class 1 National Insurance is outstanding for the accounting period.

So a company that is behind on payroll taxes should expect delay, whatever the quality of its claim.

Step 3: a possible compliance check

HMRC "opens checks within established legislative time limits". For a return filed on time, that is 12 months from delivery. For a late or amended return it is the next 31 January, 30 April, 31 July or 31 October after the first anniversary.

HMRC says it opens some checks after payment. It also says a check may involve asking for additional information or records to establish whether the project meets the definition of R&D, and meetings with the company where appropriate.

What a check usually looks like in practice:

• A letter naming the period and a reply date, often with questions on the projects, costs and evidence.
• Technical questions about the uncertainty, the competent professionals and why the answer was not readily available.
• Cost questions on how staff time was apportioned and how subcontractor and overseas costs were treated.
• Possibly a meeting with the people who did the work.
• A closure notice stating HMRC's conclusion and any change to the claim.

HMRC's figures for 2023 to 2024 give the scale: 9,700 checks, 17% of claims checked, 77% of checks leading to an adjustment, and 246 days on average to complete one. If the claim is reduced, the company repays the excess with interest and may face a penalty if the error was careless or deliberate.

What to do if HMRC asks questions

1. Read the letter and note the reply date. If you need more time, ask in writing before the date passes.
2. Do not send everything on request. Decide what is relevant to the question asked.
3. Get the claim reviewed first. A first reply is hard to retract.
4. Gather the evidence. Project notes, test records, code history and payroll records, dated at the time.
5. Prepare the people who did the work. HMRC may want to speak to them.
6. Tell us early if something looks wrong. Telling HMRC before it finds an error generally lowers the penalty.

Our HMRC enquiry defence page explains how we handle this from the first letter to closure, for claims we prepared and claims others prepared.

Making a check less likely to hurt

You cannot stop HMRC checking a claim, and a check is not a finding against you. You can make the claim easy to defend. Name the uncertainty specifically, keep contemporaneous records, apportion time with a documented method, and make sure the forms and the technical report agree. That is what our claim standard is built around.

Talk to us

If you have filed a claim and want to know where it stands, or HMRC has written to you, book a call. We reply the same working day.

This article is general information, not advice. Timings are HMRC's reported averages and can change.