A recent HM Revenue & Customs (HMRC) enquiry has revealed the importance of Tax Investigation Services.

A fintech company faced an HMRC enquiry into a £1.5 million research and development (R&D) tax relief claim, with the prospect of being told that the claim didn’t qualify, until experts stepped in and succeeded in having the enquiry closed down.

The situation

A financial technology company faced an HMRC enquiry into their R&D tax relief claim for expenditure totaling around £1.5 million.

The enquiry had been going on for over 12 months, with HMRC seemingly disregarding the information the company provided and issuing standard requests without progressing the case.

Eventually, HMRC expressed their belief that the R&D claim did not qualify and threatened to remove it entirely.

The solution

Determined to contest HMRC’s stance, the company used the support available from a Tax Investigation Service provider to challenge HMRC. The team working on this case identified potential misunderstandings by HMRC and, with their accountant, better clarified the changes in technology. After further correspondence and clarification, HMRC closed the enquiry with no amendments to the claim, marking a successful resolution for the client.

The Takeaway

This case highlights the importance of clear communication and expert intervention in resolving complex R&D tax relief enquiries.

The final costs, just under £15,000, were reimbursed to the business under their Tax Investigation Service policy.

We expect to see more and more tax investigations being carried out, which can have a significant impact on a business, in terms of time, resources and costs involved.

Milsted Langdon’s Tax Investigation Service protects against the professional costs associated with an HMRC enquiry. See more information here, or speak to one of our specialists by emailing advice@milstedlangdon.co.uk