R&D Claims – Handling Disputes if HMRC has Rejected Your Claim

Recently, we wrote about the backstory of the recent increase in HMRC enquiries into R&D claims, and some of the problems that this large project has caused. Here we will consider what your options are if HMRC has rejected your R&D claim and you disagree with its conclusion.

Present your Case Clearly

If you are still in dialogue with HMRC the matter has not yet come to a conclusion, you will still have the opportunity to present the reasons why your claim is proper and correct. It is important to clearly articulate how the project in question satisfies the fundamental requirements of the legislation. At this stage, you have the opportunity to set out your position as clearly as possible. Often, external assistance from tax specialists can help you to explore your options and help you to explain the things that you may have taken ‘as read’ and ensure that your position is argued in the best way.

Appeal Before the Deadline

If HMRC has reached conclusion and you don’t accept their position, the first thing to do is to make sure that you appeal in time. If HMRC has issued a closure notice or assessment, typically you will have 30 days to appeal that. It is important to ensure that any appeal is issued in time, otherwise you may have to argue to get your ‘late appeal’ accepted. Late appeals are not impossible, so if you are facing that situation, we can probably help, but it is certainly easier to avoid the late appeal argument, if possible.

In terms of the initial appeal, that does not need to be long or detailed – in essence it needs to be something in writing to HMRC stating that you disagree. You don’t need to set out chapter and verse why at this stage. An appeal can include a request to ‘postpone’ any tax that would be due as a result of HMRC’s conclusion.

Continue to Discuss the Case

If an appeal is submitted, that does not mean that discussions with HMRC have ended. You can continue to correspond with HMRC and set out your view, or meet with them on an informal basis, to discuss the case. Indeed, the courts would prefer that the parties do everything they can to try to resolve a dispute prior to requiring a court. Sometimes this process of discussion can lead to a full or partial resolution of the issue.

Ask for an Independent Review

If you can’t reach agreement with the HMRC inspector, you can ask for an independent review. In some cases, HMRC offers a review. It may be that the reviewing officer agrees with you, or partially agrees with you. It is not particularly often that a review is successful, but it is free so, if you’ve reached an impasse, it may be worthwhile. However, reviews introduce their own considerations about time limits, we have written about that previously in our article looking at the importance of time limits. If you have any additional evidence to present, it is important to have this ready at the point of asking for, or accepting a review, so that the reviewing officer can consider it.

Alternative Dispute Resolution (ADR)

If you can’t reach agreement, ADR may be a good option. This is a formal meeting between the parties, together with a mediator. The purpose is to try to reach an agreement, by fully exploring each sides’ views and the interpretation of the legislation.

Given that R&D involves not only consideration of the legislation, but also the technical or scientific advancement, there can be some subjectivity about whether something is actually an ‘advance’. There may well be quite a lot of detail, so it is conceivable that a structured discussion might take the matter forward far more quickly than months of correspondence.

If both sides prepare adequately before entering the meeting, it can be a very productive process. We have had far more good experiences of ADR, than bad and for the right cases we would advocate exploring this option. Even if you can’t reach an agreement, the ADR process may narrow down the areas of disagreement, so that if Tribunal is the next step, that process can be more focussed.

Tribunal – Where Preparation is Key

If you can’t agree via correspondence, discussion or ADR, Tribunal is the only other option. The tax tribunal can seem a daunting option, but by enlisting the backing of seasoned tax specialists who fully understand the process, you will feel supported. Preparation is key, and in the current environment, we would also suggest that a barrister is engaged to argue for you on the day and prepare arguments ahead of time. We have worked with many clients and barristers to prepare for Tribunal, often with successful outcomes.

Conclusion

If HMRC has rejected an R&D claim and you don’t agree with their conclusion, or you are in the enquiry process, there are several ways to take your argument forward. Often it is best to seek assistance from tax specialists who will help you to fight your corner, aiming to achieve the best possible outcome for you. We have helped hundreds of clients over the years who have had a dispute with HMRC. We provide helpful, practical advice and representation. If you need help with an R&D claim enquiry, get in touch with one of our friendly team for a no-obligation initial discussion.

You can get in touch with our friendly and experienced team on: 0203 675 8122 or email joe.mcdermott@intaxltd.com.