With the expansion of the HMRC’s R&D compliance unit, many companies are noticing an increase in correspondence directly from the HMRC. They have a few different types of letters they might send you, from a”nudge” letter to an official notice of a compliance check. Understanding these letters and how to respond to them can be crucial to effectively working with the HMRC. And if you’ve received the credit in your bank account, just know that “processed” does not equal “approved”. They may return to review your claim even after submitting the payment to your account. So what types of letters are there?
HMRC R&D Eligibility Letter
These “nudge” letters are used as a proactive way to get companies to reassess their claim for potential errors. These letters do not necessarily mean anything is wrong with your claim, but you should still take this as an opportunity to take a look and ensure you are confident that your claim would withstand a compliance check. It might be an eligibility letter if the heading states “Research and Development (R&D) tax relief – help confirming you are eligible”. These advisory letters are meant to encourage compliance without increasing reviews too much.
Now what do you do after receiving this letter? If you prepared your claim yourself, follow the links provided in the letter to the HMRC guidelines. Reevaluate your claim to ensure it really does match with these guidelines. If you are spooked now, contacting a specialist to have an overview of your claim might be beneficial. If you do decide to amend your claim, your accountant or a specialist can help you with this.
If you prepared your claim with a specialist, let them know you received this letter and they should help you from there. This is your chance to make corrections before a compliance check, so don’t be afraid to ask questions and verify everything – after all, it is your risk not the advisors! A good advisor will be happy to help you through the details.
HMRC R&D Compliance Letter
On occasion, HMRC will ask for more information to clarify any questions that may have popped up in their initial desktop review of your claim. This enquiry is initiated with a letter informing you of a compliance check. These letters are serious, and we recommend that you respond quickly. Now, an enquiry can pertain to any of your tax filing, but if it is regarding the R&D claim, it will specify that in the opening of the letter. You’ll likely notice a sentence similar to “Check of the Company tax return for the period ended…”. The letter will contain questions you need to answer as well as informational packets about enquiries. These letters come when HMRC believes there are inconsistencies in the claim and it needs a thorough review. If you filed on your own, follow the directions and don’t delay. Seek advice if you feel uncertain about this process. Compliance checks can end in penalties if errors are found in your claim. Missed deadlines or lapses in communication only make it worse. If you filed with an advisor, contact them and see what they recommend.