HMRC R&D Enquiry Outcomes & Appeals
Understanding possible outcomes helps you prepare for different scenarios. If you disagree with HMRC's conclusion, you have formal appeal rights.
Possible Enquiry Outcomes
Enquiries can conclude in several ways, each with different implications for your business.
Full Acceptance
HMRC satisfied, claim stands as submitted
Impact: Payment released (if held), no further action
Partial Reduction
Some projects or costs disallowed
Impact: Reduced benefit, possible interest charges
Full Rejection
Entire R&D claim denied
Impact: No benefit, possible penalties, interest charges
Discovery Assessment
HMRC opens enquiries into previous years
Impact: Significant potential exposure, penalties may compound
Penalties for Incorrect Claims
HMRC penalties for incorrect R&D claims are based on the taxpayer's behaviour, as defined in Finance Act 2007, Schedule 24.
| Behaviour | Unprompted Disclosure | Prompted Disclosure |
|---|---|---|
| Careless Failure to take reasonable care, inadequate record-keeping, errors due to lack of understanding | 0% – 30% | 15% – 30% |
| Deliberate Knowingly submitting an incorrect claim, claiming ineligible projects, inflating time allocations | 20% – 70% | 35% – 70% |
| Deliberate + Concealment Deliberate inaccuracy with active concealment, creating false documentation, systematic fraud | 30% – 100% | 50% – 100% |
Disclosure Benefits: Unprompted disclosure (telling HMRC before they discover the issue) significantly reduces penalties. This is why professional advice before responding is crucial.
Reference: Finance Act 2007, Schedule 24; HMRC Compliance Handbook CH80000
Your Appeal Rights
If you disagree with HMRC's conclusions, you have formal appeal rights at three stages.
Internal Review
Request within 30 days of HMRC's decision. Different HMRC officer reviews the case. Free and relatively quick (typically 45 days). Does not affect right to tribunal appeal.
First-tier Tribunal (Tax Chamber)
Independent judicial review. Must appeal within 30 days of HMRC decision (or after internal review). Formal hearing with legal procedures. Can consider new evidence. Decision is binding (subject to further appeal).
Upper Tribunal
Appeals on points of law only. Permission required. More formal legal process. Can set binding precedent.
When to Appeal
Consider appealing if:
- • HMRC has misunderstood your technical activities
- • You have strong evidence HMRC hasn't considered
- • The financial stakes justify the cost and time
- • Legal precedent supports your position
Innovation Plus can advise on appeal prospects and recommend tribunal specialists if needed.
Key Tribunal Cases
Recent tribunal cases provide guidance on R&D enquiry issues. These precedents can support your position.
COLLINS CONSTRUCTION LIMITED v HMRC
[2024] UKFTT 00951 (TC)
Documentation standards, contemporaneous evidence
QUINN (LONDON) LIMITED v HMRC
[2023] UKFTT 00437 (TC)
R&D within commercial contracts
HADEE ENGINEERING CO LTD v HMRC
[2023] UKFTT 00595 (TC)
Distinguishing production from R&D
GET ONBORD LTD v HMRC
[2024] UKFTT 00155 (TC)
Software development standards
GRAZER LEARNING LIMITED v HMRC
[2023] UKFTT 00854 (TC)
Permanent beta, witness testimony
AHK RECRUITMENT LIMITED v HMRC
[2024] UKFTT 00120 (TC)
Technological uncertainty evidence
Facing an Unfavourable Outcome?
If HMRC has rejected or reduced your claim, let us review your case. We can advise on appeal prospects and next steps.