What happens if HMRC opens an enquiry into my R&D claim?

How HMRC opens an enquiry

HMRC does not need a reason to open an enquiry, and it does not have to tell you why it has chosen your return. The formal step is a written notice of enquiry, and the timing depends on when you filed:

• if you filed on or before the filing date, HMRC can give notice at any time up to twelve months from the day you delivered the return;
• if you filed late, the window instead runs to the next quarter-day (31 January, 30 April, 31 July or 31 October) after the first anniversary of the day you delivered it;
• if you amend your return, HMRC gets a fresh window running to the next quarter-day after the first anniversary of the amendment — but only in relation to what the amendment changed or affects, if an enquiry into the original return has already closed.

If your company is part of a group other than a small group, the twelve-month clock runs from the filing date, not from the day you actually delivered the return. For a group company that files early, this can materially shorten the window HMRC has — worth checking before assuming an early filer is automatically safer.

A return can only be the subject of one notice of enquiry, unless a later one is triggered by an amendment. Once the window has passed with no notice, the return is final for HMRC’s purposes — subject to HMRC’s separate power to raise a discovery assessment later, which is a different route with different conditions, covered in Discovery assessments: how HMRC can reopen a closed R&D claim.

HMRC’s public branding for this is a “compliance check” rather than “enquiry” — the two are the same thing procedurally. What is genuinely different is the informal correspondence HMRC sometimes sends before any notice of enquiry is given at all: a “one-to-many” or nudge letter, prompting you to review and correct your own return where HMRC has noticed a pattern across many similar claims. A nudge letter is not an enquiry, carries no formal information powers, and does not extend or restart the enquiry window. Ignoring one is a different kind of risk to ignoring a notice of enquiry, and the distinction is covered in full in Volume compliance checks: how HMRC screens R&D claims at scale.

What the enquiry covers

Once open, an enquiry extends to anything in the return or required to be in it — the whole return, not only the R&D claim, and including any claim or election within it. In practice, HMRC scopes most R&D enquiries to the R&D claim specifically in its opening letter, but there is no statutory obligation to keep it that narrow, and nothing stops a later information request from widening into other parts of the return.

The opening letter typically asks for the technical narrative supporting the claimed advance and uncertainty, the underlying cost workings, and a first round of supporting evidence. What HMRC can formally require you to produce — and what you can push back on — is covered in Information notices: what HMRC can require you to provide; in practice, most of an enquiry runs on informal correspondence rather than a formal notice, because a formal notice is only needed where the request is refused or contested.

A pattern worth expecting. Requests in an R&D enquiry commonly start broad — a project plan and general timeline — and narrow with each round to something specific: for each project claimed, when the technological uncertainty was first identified, when work to resolve it began, when it was overcome, and what contemporaneous documents evidence each of those dates, with an explicit instruction to say plainly where no such documents exist rather than reconstruct them. Preparing that timeline, project by project, before HMRC asks for it — not after — is the single biggest difference between an enquiry that closes quickly and one that does not. See What records do I need to keep to support an R&D tax relief claim? for what “contemporaneous” needs to mean in practice.

What HMRC can do while the enquiry is open

Two powers sit alongside the ordinary back-and-forth of correspondence, and both are used rarely but matter when they are:

A jeopardy amendment. If, while the enquiry is in progress, an officer forms the opinion that the tax stated as payable is insufficient and that unless the assessment is amended immediately there is likely to be a loss of tax to the Crown, HMRC can amend your self-assessment there and then, without waiting for the enquiry to finish. This is not a normal step in an R&D enquiry and its use signals that HMRC considers there is a real risk of the claim period becoming time-barred or the company becoming uncollectable before the enquiry would otherwise conclude.

Your own amendments are suspended. If you amend your return while an enquiry into it is in progress, the amendment does not take effect — for anything the amendment relates to or affects — until the enquiry concludes. You can still make the amendment, but it sits pending rather than changing your tax position immediately. This matters if, partway through an enquiry, you or your adviser identify that the original claim understated or overstated qualifying costs: the correction is made, but HMRC’s closure notice decides the position.

How the enquiry ends

HMRC closes an enquiry with a closure notice, which since November 2017 can be given in two forms. A partial closure notice closes off one specific matter within the enquiry while the rest continues — useful where HMRC is satisfied on, say, the technical position but still working through the cost figures. A final closure notice closes everything not already dealt with by a partial closure notice, and is what actually ends the enquiry.

Every closure notice must state HMRC’s conclusions, and then either confirm that no amendment is needed, or make the amendment required to give effect to those conclusions. There is no requirement for HMRC to have reached a firm, final position on every point before issuing it — the notice states what HMRC has concluded, and that conclusion is what you can appeal against.

There is no statutory time limit on how long an enquiry itself can run once it is open. If it drags on with no apparent progress, you can apply to the tribunal for a direction requiring HMRC to issue a partial or final closure notice within a specified period. The tribunal must give the direction unless HMRC satisfies it that there are reasonable grounds not to close the enquiry yet — in practice a real barrier for HMRC to clear, not a formality, but also not a step to take reflexively the moment correspondence goes quiet for a few weeks.

If you disagree with the outcome

You can appeal an amendment made in a closure notice. Notice of appeal must be given in writing, within 30 days of the amendment being notified to you, to the officer who gave the closure notice. If you miss the 30 days, you generally need HMRC’s agreement, or the tribunal’s permission, to appeal late.

An appeal does not go straight to a tribunal hearing. HMRC will typically offer either a review of the decision by an HMRC officer not previously involved, or referral to Alternative Dispute Resolution — a facilitated negotiation, not a determination of who is right. Both are usually worth taking before litigating: they cost nothing but time, and a real proportion of R&D disputes resolve at this stage rather than at tribunal. The mechanics of both routes, and what happens if the dispute does go to the First-tier Tribunal, are covered in Appeals, ADR and the tribunal: challenging an HMRC decision on an R&D claim.

Penalties

A closure notice amendment reducing your claim does not automatically carry a penalty. HMRC must separately consider whether an inaccuracy in the return was careless or deliberate, and penalties turn on that behaviour, not the fact of an amendment. An enquiry that ends with HMRC agreeing your figures were wrong, but your position was reasonably arguable, and your records were in reasonable order, commonly closes with no penalty at all. What behaviour attracts what penalty, and what reduces one, is covered in Penalties and behaviours: what an inaccurate R&D claim can cost.

Older enquiries — closure notices given before 16 November 2017

Before the partial closure notice mechanism was introduced, an enquiry closed in a single step: one closure notice, covering everything, ending the whole enquiry at once. HMRC could not close off an agreed point while continuing to dispute another. If you are dealing with a legacy enquiry opened long ago that is only now being revisited — an amendment to an amendment, or a discovery point referring back to an old enquiry — check which closure mechanism actually applied at the time, because the single-notice version has no equivalent to a partial closure notice and the two should not be assumed to work the same way procedurally.