HMRC has intensified its review of R&D tax credit claims in 2025. If you have been contacted by HMRC or are concerned about a previous claim, our team are here to help.
Many businesses are receiving enquiry letters for the first time, even where they believed their submissions were correct. The shift reflects HMRC’s updated compliance approach and its commitment to reducing error and fraud across the scheme. Understanding what has changed, and what to do next, can make the process far less stressful.
At a glance
HMRC’s compliance teams are now carrying out more R&D enquiries than in previous years.
In this article you will learn:
- Why HMRC is taking a stricter approach in 2025.
- Which businesses and sectors are being contacted most often.
- How HMRC identifies “high-risk” claims.
- What an enquiry letter usually means.
- How to respond safely and protect your position.
Why has HMRC launched a stricter R&D compliance approach in 2025?
HMRC’s 2023–24 annual report and its published approach to R&D tax reliefs show higher levels of error across the scheme than previously understood. As a result, HMRC has increased staffing within specialist R&D compliance units and is conducting more in-depth reviews of claims.
Several factors sit behind the 2025 crackdown.
Higher error and fraud estimates
HMRC’s internal modelling indicates that a significant proportion of claims contain inaccuracies. Many of these arise from misunderstanding the rules rather than deliberate behaviour. Even so, HMRC is under pressure to reduce non-compliance.
Greater scrutiny of R&D advisers
HMRC has identified certain high-volume agents whose claims have repeatedly failed technical or financial checks. Clients of those advisers are now more likely to be selected for enquiry.
Sector-based risk models
Businesses in software development, engineering, construction, and fintech continue to receive the most enquiries. HMRC believes claims in these sectors frequently rely on activities that do not meet the definition of R&D for tax purposes.
Introduction of the merged R&D scheme
The move to a single scheme from April 2024 has triggered HMRC to review claims more closely while businesses adjust to the new rules. The merged R&D Expenditure Credit scheme includes changes to the treatment of subcontracted R&D and externally provided workers, and a cap that links the amount of relief to PAYE and NIC liabilities, which HMRC expects businesses and advisers to apply correctly.
Parliamentary and internal oversight
HMRC has been encouraged to strengthen its approach and reduce the cost of non-compliant claims. This is reflected in wider, deeper enquiries.
FWJ Takeaway: HMRC’s aim is to bring more consistency to the scheme. This means more checks, including for businesses that have always tried to act correctly.
Who is most affected by HMRC’s increased R&D checks?
Although enquiries can affect any claimant, several groups are seeing more contact from HMRC this year.
1. SMEs with limited supporting evidence
Smaller businesses often prepare R&D claims without detailed documentation. HMRC is focusing on whether claims are backed by clear evidence of technical uncertainty.
2. Businesses using high-risk or unregulated advisers
Where an adviser has submitted large volumes of speculative claims, HMRC may examine all associated clients as part of a wider project.
3. Companies in high-risk sectors
Software and technology businesses are frequently contacted where HMRC believes claimed activities appear to be commercial development rather than technological problem-solving.
4. Companies with inconsistent financial information
Where costs in the R&D computation do not align with payroll, subcontractor invoices or internal project records, HMRC may launch a review.
5. Businesses with past amendments or corrections
A history of adjustments can increase the likelihood of further checks.
FWJ Takeaway: Being contacted by HMRC does not mean your claim is wrong. It often reflects patterns within your sector or the behaviour of your adviser, not the quality of your work.
How does HMRC identify “high-risk” R&D claims?
HMRC uses a mixture of automated risk-modelling, adviser profiles and specialist review to decide which claims require further scrutiny.
Data-driven risk scoring
HMRC compares each claim with similar businesses in the same industry. Claims that appear unusually large or complex may be flagged for manual review.
Adviser behaviour
If an adviser is on HMRC’s high-risk list, all their clients’ submissions are more likely to be examined.
Claim patterns that raise concern
Recurring features in rejected claims include:
- generic technical reports
- unclear descriptions of technological uncertainty
- inconsistent staff cost allocations
- claims for routine or commercial development
- limited documentary support
Sector-level intelligence
Compliance teams share information internally to identify common themes or mistakes within particular industries.
FWJ Takeaway: HMRC’s selection process is risk-based and does not rely solely on technical review. Even strong claims can be selected if they fall into certain patterns.
What does an HMRC R&D enquiry letter usually mean?
The enquiry letter is often the first sign a business has been selected for review under HMRC’s general compliance powers, including its ability to enquire into company tax returns under section 9A of the Taxes Management Act 1970 and to request information and documents under Schedule 36 to the Finance Act 2008. This can be unsettling, but the letter itself usually identifies the areas HMRC wants to understand better.
Most letters request:
- clarification of the technical uncertainty
- project descriptions
- evidence of qualifying activities
- payroll or subcontractor records
- calculations supporting the claim
- an explanation of how the figures were prepared
In many cases, HMRC simply needs more information to confirm the claim. However, if HMRC believes an error may have occurred, they may amend the claim or seek repayment of tax credit already received.
You retain the right to challenge any decision and to seek professional representation at any stage.
FWJ Takeaway: An enquiry letter is not an accusation of wrongdoing. It is an opportunity to provide evidence and resolve HMRC’s concerns before they escalate.
How should a business respond safely to the 2025 crackdown?
A careful and timely response can make a significant difference to the outcome of an enquiry.
1. Respond within the deadline
This helps to maintain a positive working relationship with HMRC and prevents assumptions being made about the accuracy of the claim.
2. Answer each question clearly
HMRC expects direct answers supported by relevant documents. Overly long or defensive responses can lead to follow-up questions.
3. Provide contemporaneous evidence where possible
Timesheets, technical notes, prototypes and internal correspondence all help to demonstrate the work carried out and are often critical in showing both that the activities qualify and that you took reasonable care when preparing the claim.
4. Understand the penalty framework
If HMRC considers that inaccuracies arise from carelessness, penalties may apply. These can often be reduced by cooperating and correcting errors early.
5. Challenge decisions you disagree with
You can usually ask for an internal review by an HMRC officer who was not involved in the original decision and, if you still disagree, you can appeal to the First tier Tribunal (Tax Chamber) within the relevant time limits. Many disputes are resolved before reaching that stage, but businesses should understand their rights to review and appeal.
6. Seek specialist support
Our tax dispute team has over 25 years’ experience dealing with HMRC across England and Wales. We regularly advise clients facing R&D enquiries, repayment demands, and more complex COP8 or Code of Practice COP9 investigations.
FWJ Takeaway: Clear communication, organised evidence and early advice help protect your position and keep the process manageable.
How we can help
We support businesses and directors who are facing R&D tax credit investigations or wider HMRC investigations. Our work includes advising on responses, preparing evidence, negotiating repayment terms, and challenging decisions where appropriate.
If HMRC has contacted you about an R&D claim, we can help you understand what the letter means and guide you through the next steps.
Contact our specialist tax dispute team today for clear, practical advice.
