The reviews and audits page sets out the framework: the three intervention levels, penalties, disclosures and appeals. This page is about the audit itself, the Level 2 intervention that most R&D credit disputes run through, from the letter to the settlement. The audit has a shape that repeats: a scoping letter, an opening meeting, a technical review that usually involves Revenue's independent expert, a financial review of the expenditure, and a closing meeting at which adjustments and penalties are agreed or disputed.
What it is
| Stage | What happens | Typical timing |
|---|---|---|
| Notification | A letter stating that a Level 2 audit will take place, the periods, the taxes and the matters under review, and the date of the opening meeting; it sets the deadline for a prompted qualifying disclosure | Several weeks' notice |
| Opening meeting | Revenue explains the scope and asks for the claim file, the project descriptions, the expenditure reconciliation and access to technical staff | Day one |
| Technical review | Revenue, usually with an appointed expert, reviews each project against the science test, reads the records and interviews the technical staff | Weeks to months |
| Financial review | Revenue reconciles the claim to the accounts and payroll and tests apportionments, subcontracting caps, grants and plant and machinery | Concurrent |
| Findings | Revenue sets out proposed adjustments and the expert's conclusions, and invites a response | After the reviews |
| Closing meeting and settlement | Adjustments, interest and penalties agreed, or the matter proceeds to assessment and appeal | End of audit |
Who it applies to
Any claimant. Revenue selects claims for compliance interventions on a risk basis. Revenue's R&D audits concentrate on the science test, because that is where the money is: a project that fails the test loses all its expenditure, while an accounting test adjustment usually trims. A company receiving an audit letter for another tax may find the R&D credit added to the scope.
How it works
Before the opening meeting. Review the claim against the science and accounting tests. If an error is found, consider a prompted qualifying disclosure: it cuts the penalty and avoids publication. Assemble the claim file project by project and identify the competent persons who will speak to each.
The technical review. Revenue notifies the company that it intends to consult an expert and names the field. The expert reads the project descriptions and the contemporaneous records, meets the technical staff and reports to Revenue on each project against the four questions of the science test. The meeting is the decisive moment. Revenue's experts respond well to engineers and scientists who can say what was unknown, what they tried and what they learned, with the dated records open in front of them, and poorly to advisers reading from a report.
The financial review. The auditor ties the claimed expenditure to the ledger and the payroll, tests the time apportionment against timesheets, checks the subcontracting and third level caps and the written notifications, confirms grants were excluded, and reviews plant and machinery use. Overheads are a frequent adjustment: anything not wholly and exclusively on the R&D comes out.
Findings and settlement. Revenue's letter of findings sets out the proposed disallowances with the expert's reasoning. The company responds in writing, with further evidence or its own expert's view. Agreed adjustments are settled with interest and a penalty under the Code of Practice, mitigated for cooperation. Disputed adjustments are assessed and can be appealed to the Tax Appeals Commission within 30 days.
Worked example
Illustrative example. Deel Robotics Limited, a hypothetical company, receives notice of a Level 2 audit of its 2024 R&D credit claim of €240,000 across five projects. Before the opening meeting its finance director finds that general overheads of €40,000 were included; Deel makes a prompted qualifying disclosure and repays the credit on that amount with interest and a reduced penalty. Revenue appoints a robotics academic as expert. Four projects pass on the strength of the engineering logs and the chief engineer's explanations. The fifth, a conveyor integration, is found to involve no technological uncertainty; Deel does not contest the finding and the credit on €60,000 of expenditure is withdrawn, with a penalty in the careless category mitigated for cooperation. The audit closes in five months. Deel's 2025 claim, prepared with the same care applied to the four surviving projects, is not audited.
Common questions
Can we refuse Revenue's expert? No. The Act allows Revenue to consult an expert; it must notify the company before doing so.
Will instalments be paid during the audit? Revenue may withhold repayments while the claim is under review.
Should our adviser attend? Yes, to manage the process. The technical staff should answer the technical questions.
How far back can Revenue go? Generally 4 years from the end of the accounting period in which the return was filed, and without limit where the return was not full and true.
Related pages
Official sources
Educational content only, not tax advice. See the disclaimer.