Responding to a tax authority enquiry
A review of an R&D claim is the tax authority asking the claimant to show that the claim is what it says it is, and most of the outcome is decided by records made long before the letter arrives. This guide covers reading the information request, assembling an indexed response, using the technical lead, conceding weak points, and the route to challenge a decision.
A review of an R&D claim is not an accusation. It is the tax authority asking the claimant to show that the claim is what it says it is: that the projects resolved a technical uncertainty, that the people and costs claimed were spent on that work, and that the figures reconcile. Claims built from records made at the time answer those questions in weeks. Claims built from a year-end narrative and estimates do not, and the difference is decided long before the information request arrives.
Here "review" means any check of a filed claim and "information request" the written questions that start it; each scheme's own names and time limits are in the country rows below.
What this guide covers
- How reviews start, and how to read the information request before answering it.
- Assembling an indexed response and using the technical lead.
- Meetings and site visits, and conceding weak points.
- Timelines, outcomes and the route to challenge a decision.
- A response plan from the first letter to the decision.
How reviews start
Most schemes describe their selection of claims for review as risk-based, and the published factors are similar: the claimant's history, the size of the claim and any change in it, the sector, the claim preparer, and the consistency of the information filed. Where a separate body registers or approves the activities, that body may open a review as well as the tax authority.
The review almost always opens in writing. Treat the date on that letter as the start of a timetable, and tell the technical lead and the senior officer responsible for the claim the same day.
Reading the information request
Read the request for what is asked, what it implies, and the deadline and form of response. Then build a question register, one row per question, with the document or person that answers it, the owner and the status. Most requests fall into four groups.
| Group | What is being tested | What answers it |
|---|---|---|
| The projects | Whether a technical uncertainty existed, what was done to resolve it, and when the work started and ended | The project start note, dated technical records and the narrative, in the technical lead's words |
| The people | Who did the work, their competence, and how their time was apportioned | Time records, role descriptions, the technical lead's confirmation |
| The costs | Whether each cost was incurred, falls in an eligible category and reconciles to the accounts | Payroll, invoices, contracts dated before the work, ledger extracts |
| The claim mechanics | Entity status, rates, caps, elections, registrations or approvals, and who prepared the claim | Group structure, the computation, the filed forms, the engagement letter |
Assembling an indexed response
The response is a document, not a folder. It answers each question in the order asked, in a few sentences, and refers to numbered exhibits chosen for relevance, not volume. Thirty well-chosen pages are read; three thousand are sampled, and the reviewer chooses the sample.
- Reconcile the numbers first. Tie staff costs to payroll, contractor costs to contracts and invoices, and the totals to the figures filed. A figure that does not reconcile undermines every other answer.
- Answer the question asked. Not a reorganised narrative in place of answers.
- Index the exhibits. Number them, date them, name the author, and cross-reference each from the answer it supports. Supply records in their native form, not retyped extracts.
- Say what is not there. If a record does not exist, say so and explain what does.
- Have one voice. The senior officer responsible for the claim signs the response; an adviser may draft it, but the company owns it.
Using the technical lead
The person who led the technical work is the claim's best asset and its greatest risk. Reviewers want to hear from them in their own words. Prepare them by walking through the narrative and the exhibits together, not by scripting answers. They should be able to state the uncertainty in two sentences, describe what was tried and what failed, point to the records by name, and say plainly which parts were routine. A technical lead who concedes the routine parts is believed on the rest. An adviser who speaks for them is not.
Meetings and site visits
Several schemes include a meeting with technical staff or a site visit as a standard step. Agree the agenda, the attendees and the duration in advance. Have the exhibits on screen in their native systems, because reviewers often ask to see a record where it lives. Take your own notes of who attended, what was asked and what was agreed, and send the reviewer a short written summary afterwards; it is part of the file if the decision is later challenged.
Conceding weak points
Most claims under review contain something that cannot be evidenced: a project that turns out to be configuration of a purchased product, an apportionment with no record behind it, a contractor cost without a contract. Withdraw it, in writing, early. The rest of the claim is more credible for it, and in most schemes a correction offered before the reviewer finds the error is treated more favourably on penalties than one conceded after. The claim integrity guide sets out why a smaller claim that survives is worth more than a larger one that does not.
Timelines, outcomes and the route to challenge
Every information request carries a response date. If it cannot be met, ask for more time before it passes, in writing, with a reason.
A review ends in one of three ways: the claim is accepted, adjusted by agreement, or adjusted or denied against the claimant's position. An adjustment means repayment of the benefit or additional tax, usually with interest, and a penalty where the error was careless or worse. Every scheme covered here offers a route to an independent tribunal or court, and most include an administrative or internal review stage first. Each stage has a short, fixed period in which to begin, counted from the date of the decision. Decide early which points are worth challenging, and keep the file in the form a tribunal would need.
| Stage | Action | Owner |
|---|---|---|
| Day the letter arrives | Log the deadline; inform the technical lead and the senior officer; appoint one coordinator | Finance lead |
| First week | Build the question register; settle unclear scope with the reviewer; request any extension now | Coordinator |
| Weeks two and three | Reconcile the costs; assemble dated exhibits per project; decide on each weak point | Finance and technical lead |
| Before submission | Draft the response question by question; index the exhibits; state the concessions; sign | Coordinator and senior officer |
| Meeting or site visit | Agree the agenda; show records in native systems; take notes; send a written summary | Technical lead |
| Preliminary findings | Respond in writing point by point with evidence; most disagreements are settled here | Coordinator |
| Decision | Diary the challenge period the day the decision arrives; decide which points to pursue | Senior officer |
Illustrative example
Illustrative example. Corran Castings Ltd, a hypothetical company, receives an information request about a claim for 400,000 of eligible costs across four projects. The coordinator builds a register of nineteen questions. Finance reconciles the staff costs to payroll and finds one contractor invoice of 20,000 with no written contract; the company withdraws it. The technical lead assembles dated trial logs for three projects. The fourth, a scheduling system, turns out to be configuration of purchased software with no technical uncertainty, and its 60,000 of costs are withdrawn too. The response, with 24 indexed exhibits, goes in on time. At the meeting the technical lead explains the three remaining projects from the logs, and the reviewer accepts them. The claim closes at 320,000 of eligible costs, with interest on the benefit received on the withdrawn 80,000 and no penalty, because the company corrected the errors itself.
Country differences
| Country | How reviews start and the time limits in official guidance |
|---|---|
| United States | Research credit claims can be selected for examination through the IRS's normal return selection processes. The IRS generally has three years from the filing of a return to assess additional tax. A taxpayer may petition the Tax Court within 90 days of a notice of deficiency without paying. |
| United Kingdom | For most companies, HMRC can open an enquiry within 12 months of the date the return was delivered; for members of large groups, within 12 months of the filing date. HMRC information requests in a compliance check usually set a 30 day deadline, which can be extended on request. |
| Ireland | Revenue selects claims for compliance interventions on a risk basis. The audit notification letter gives at least 21 days' notice of the opening meeting and states the scope of the audit. A notice of appeal against an assessment must be made to the Tax Appeals Commission within 30 days after the date of the notice of assessment. |
| Canada | The CRA risk-assesses each SR&ED claim on receipt and either accepts it as filed or selects it for a financial review, a technical review or a coordinated review. The normal reassessment period is three years after the date of the original notice of assessment for a CCPC and four years for other corporations. A notice of objection must be served within 90 days after the day of sending of the notice of assessment. |
| Australia | The department selects registrations for examination on a risk basis. It sets a period for the company to respond and may follow up with a site visit or meeting with the company's technical staff. The Commissioner may amend an assessment within 2 years for a small business entity or 4 years for other taxpayers. An applicant may request internal review of a finding within 28 days of notice. |
| New Zealand | Inland Revenue selects claims for review on a risk basis. The Commissioner may amend an assessment within 4 years after the end of the tax year in which the return was filed. The disputes process requires a notice of proposed adjustment, a notice of response within 2 months, a conference phase, statements of position and adjudication, after which the taxpayer may challenge the assessment in the Taxation Review Authority or the High Court. |
| Singapore | IRAS may request further information on R&D claims before finalising the assessment, and selects companies for audit on a risk basis. It may make an additional assessment within 4 years after the end of the Year of Assessment. An objection to a notice of assessment must be lodged within 2 months of its date. |
Related pages
- Contemporaneous documentation: what reviewers actually look for
- Why claim integrity matters
- In-House Finance Team Program, module 9: reviews and audits
- Advisor and Practitioner Program, module 6: disputes and audits
- Documentation and compliance hub
Educational material, not advice. Review procedure, time limits and penalties depend on the scheme and the facts.
Sources
- IRS Independent Office of AppealsInternal Revenue Service
- HMRC compliance checks: factsheetsGOV.UK
- Code of Practice for Revenue Compliance InterventionsRevenue Commissioners
- SR&ED Claim Review Manual for Research and Technology AdvisorsCanada Revenue Agency
- Industry Research and Development Act 1986Federal Register of Legislation
- Tax Administration Act 1994New Zealand Legislation
- Income Tax Act 1947Singapore Statutes Online
Educational content only, not tax advice. Rules change and eligibility depends on your circumstances, so check the official guidance or speak to a qualified advisor before you claim. See the disclaimer.