HomeFWJ TakeawayTax disputesR&D Tax Credit investigationsHMRC R&D tax credits investigations: A Guide for CFOs

If your company has been threatened with an R&D tax credit investigation, we have the defence team to help. Early intervention from our specialists will make all the difference.

Act quickly if you have been contacted by HMRC about R&D tax credits

As the Chief Financial Officer (CFO) of a company, you understand the critical role that R&D tax credits play in driving innovation and growth.

  • However, an HM Revenue and Customs (HMRC) investigation into your R&D tax credits claim can be a significant concern, not only for the company but also for your professional position and reputation.
  • With the right guidance and support, you can navigate this process confidently and ensure the best outcome for your company and your career.

Our tax defence team at Francis Wilks & Jones

Our expert team have been defending R&D tax credit investigations for many years. Our team includes

  • Andy Lynch. Andy is an expert on a wide range of HMRC claims and before joining FWJ, he spent 18 years at HMRC in their special investigations team. His experience is unrivalled and he regularly defends complex R&D claims as well as a range of other tax related investigations.
  • Phoebe Pexton. Phoebe specialises in R&D defence work, most recently obtaining a successful result for a lighting company being investigated by HMRC. Her delighted client commented as follows “Simply outstanding service! From the initial enquiry to the final submission, I have been thoroughly impressed with the advice and communication, depth of knowledge and turnaround time from this firm. Specific thanks must go to Phoebe Pexton for her attention to detail
  • Anita Sharma. Anita has over a decade’s experience defending HMRC’s claims.
  • Pembe Ramadan. Pembe is a former HMRC litigator with over 60 appearances before the First Tier Tax Tribunal.

Understanding HMRC Investigations into R&D Tax Credits

HMRC is committed to ensuring that R&D tax credit claims are accurate and legitimate. Investigations into these claims can take several forms:

  • Compliance checks. Routine checks to verify the legitimacy and accuracy of your R&D tax credit claims.
  • Full investigations. In-depth reviews of your R&D activities and associated costs to ensure they meet HMRC’s criteria.
  • Targeted reviews. Focused investigations triggered by discrepancies or patterns in your claims that deviate from industry norms.

Positive First Steps

Receiving a notice of a R&D tax credit investigation doesn’t have to be overwhelming. Here are the key steps to take to set yourself and your company up for a successful resolution:

  • Stay positive and seek professional advice. Engage one of our expert tax dispute lawyers with experience in R&D tax credit investigation immediately. Our expertise can make a significant difference in the outcome and provide peace of mind.
  • Organise your documentation. Gather all relevant documents, including project descriptions, financial records, technical reports, and correspondence with HMRC. Having everything in order will help you respond efficiently.
  • Understand the scope. Clarify whether the investigation is a routine compliance check or a more in-depth review. Knowing the scope helps you prepare appropriately.

How we can help you

Our team of seasoned tax dispute lawyers is dedicated to helping CFOs navigate HM Revenue & Customs investigations into R&D tax credits with confidence and peace of mind. Here’s how we can support you:

  • Initial consultation and assessment. We start with a thorough review of your case to identify the specific issues and develop a tailored strategy.
  • Representation and communication. We represent you in all communications with HMRC, ensuring your responses are precise and timely.
  • Document review and preparation. We meticulously review your R&D documentation and assist in preparing any additional information required by HMRC.
  • Negotiation and resolution. Our goal is to resolve the investigation efficiently and favourably, whether through negotiation, settlement, or, if necessary, litigation.

Understanding potential R&D tax credits penalties

If HMRC upholds the investigation and finds that there were inaccuracies or fraudulent claims in your R&D tax credits, your company could face several penalties, including:

  • Repayment of R&D tax credits. Your company may be required to repay any R&D tax credits that were improperly claimed.
  • Interest on overpaid credits. HMRC may charge interest on any overpaid tax credits from the date they were received.
  • Financial penalties. Additional penalties can be imposed, depending on the nature of the inaccuracies. These penalties can range from 0% to 100% of the tax underpaid or overclaimed, based on the degree of carelessness, deliberate behaviour, or concealment.
  • Public naming. In serious cases, HMRC may publish the details of businesses found to have made incorrect claims, which could damage your company’s reputation.
  • Criminal prosecution. In extreme cases of fraud, criminal charges could be brought against the company and responsible individuals, leading to fines and potentially imprisonment.

Reassurance through our success stories

We have successfully guided many companies through HMRC investigations, helping them achieve positive outcomes and protecting the reputations of their financial leaders.

For example, a CFO we worked with faced a significant HMRC inquiry into their R&D claims.

  • By working closely with us, they provided the necessary documentation, clarified their R&D activities, and ultimately resolved the investigation with no penalties.
  • This experience not only safeguarded their professional standing but also reinforced their company’s compliance processes.

Tips for future success

While some HMRC investigations are random, there are proactive steps you can take to minimize your risk and protect your professional reputation:

  • Maintain accurate records. Ensure that your R&D records and financial documents are always accurate and up to date.
  • Prepare thorough documentation. Detailed project descriptions and technical reports can substantiate your R&D claims.
  • Consult regularly with a tax professional. Regular consultations can ensure your R&D tax credit claims comply with HMRC regulations. If you need recommendations for a trusted tax professional, we can put you in touch with a range of firms who might be able help.
  • Be transparent. If you discover an error in your claims, disclose it to HMRC promptly. Transparency can mitigate penalties and demonstrate your commitment to compliance.

Don’t panic – let us help you today

Facing an HMRC investigation into your R&D tax credits needn’t spell disaster. With the right support and a proactive approach, you can navigate the process successfully and emerge stronger. Our experienced tax dispute lawyers are here to guide you every step of the way, ensuring the best possible outcome for your company and your professional reputation.

Andy Lynch at FWJ was literally a life saver for me. I ran in to some tax issues with HMRC and I suffer from mental health issues as well so I was a complex case. Andy took his time to professionally and accurately layout my case and assist me with finding a resolution. I researched a lot of tax advisers before making my decision and I am glad I did and relieved that I chose Andy and FWJ.

Chris Kitchen

Key contacts

Pembe Ramadan

Pembe Ramadan

Associate

Anita Sharma

Anita Sharma

Senior Associate

Phoebe Pexton

Phoebe Pexton

Solicitor

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Case studies

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