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R&D Tax Credit Appeals: Challenging HMRC When Your Claim Is Refused

HMRC has refused or clawed back your R&D tax relief and the consultancy has gone quiet. How the Schedule 18 FA 1998 appeal route works, and what reasonable care looks like when you relied on outside advice.

Liam Williams

Liam Williams

— 25 min read
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You claimed R&D tax relief on your accountant's or a specialist consultancy's advice. Maybe you received a payable credit. Maybe the relief just reduced your corporation tax bill. Either way, HMRC has now opened an enquiry, refused the claim, or wants the cash back—and the consultancy that prepared the report has gone quiet.

The position can feel impossible. You are not a scientist or a tax lawyer. You signed off a return your adviser said was correct. You are now being treated as the one who has to defend it. The legal point is direct: under Schedule 24 FA 2007, the company is liable, even where a consultancy did the technical work. The consultancy's failings can support your defence on penalties, but they are not a shield.

What you need first is a map—of which letter you have, which regime applies, what HMRC is actually arguing, and what timing windows are running. This guide walks through each piece. R&D tax relief sits inside its own corporation-tax procedural code at Schedule 18 to the Finance Act 1998, separate from the Taxes Management Act 1970 framework most of our other articles cover. The substantive eligibility law—what counts as R&D—sits in CTA 2009 Part 13 and the BEIS/DSIT Guidelines.

You are not alone in this. HMRC's Mandatory Random Enquiry Programme found error-and-fraud rates of 16.7% across SME and RDEC schemes combined for 2020–21 (24.4% in the SME scheme alone), and 17.6% in 2021–22. HMRC has been opening volume enquiries since 2023—around 9,700 enquiries on roughly 61,000 claims in some recent cohorts. The CIOT and other professional bodies criticised the volume-compliance approach in an open letter in December 2023; HMRC will require R&D advisers to register from May 2026. This is the climate behind the letter on your desk: a programmatic enforcement push, not a personal accusation.

What HMRC's Letter Actually Means

Most R&D disputes start with one of three documents. Identify yours before doing anything else, because each has its own time limit. HMRC letters are not always plain about which power they are using, so look at the legal reference cited near the top or in the closing paragraphs—not just the marketing-style heading.

Finding your accounting period. Several time limits below run from the end of the accounting period or the date the company tax return was delivered. Your accounting periods are listed on every CT600 you have filed and on Companies House under "Accounts" and "Confirmation statement". They normally match your statutory year-end, but a long first period or a short period after a year-end change can split into two accounting periods for tax. If your year ended on or before 31 March 2024, you are under the pre-merger rules; if it begins on or after 1 April 2024, the merged scheme applies.

Notice Of Enquiry (Sch 18 Para 24 FA 1998)

A notice of enquiry under paragraph 24 of Schedule 18 is HMRC's formal opening of a check into your company tax return. It does not tell you HMRC has decided anything. It just preserves HMRC's ability to investigate—and to amend the return at the end—within a defined period. HMRC must give the notice within 12 months of the date the return was delivered (longer for late returns, amended returns, and certain large groups). The letter typically cites "paragraph 24, Schedule 18, Finance Act 1998" or refers to "a check into your company tax return" and quotes the accounting period and your unique tax reference (UTR).

For most enquiries the procedural mechanics are the same as the income-tax process covered in our enquiries and closure notices guide, but with corporation-tax variations: the opening notice is paragraph 24 not section 9A TMA, and the closure notice is paragraph 32 not section 28A.

Schedule 36 Information Notices

While the enquiry is open, HMRC will normally request documents and explanations. The first round usually arrives as informal correspondence. If you do not respond, or if HMRC wants to formalise its list, the next letter is a Schedule 36 information notice with statutory penalties for non-compliance. R&D enquiries often involve detailed requests about project records, time-tracking sheets, technical documentation, and contracts with subcontractors and clients.

For the mechanics—what you can refuse, what you can appeal, and the 30 days window—see our Schedule 36 information notices guide.

Closure Notice (Sch 18 Para 32) Or Discovery Assessment (Para 41)

The enquiry ends with a closure notice under paragraph 32 of Schedule 18. The closure notice states HMRC's conclusions and amends your self-assessment under paragraph 34. If HMRC reduces or removes the R&D relief, the amendment will reflect the additional corporation tax due, plus any clawback of paid credit. You have 30 days from the date of the closure notice to appeal under paragraph 48(2). A closure notice usually carries a heading along the lines of "Closure notice—paragraph 32 of Schedule 18 to the Finance Act 1998" and an explicit "appeal rights" box near the foot of the letter.

If HMRC missed the original 12-month enquiry window but later discovers what it considers an insufficiency, it can issue a discovery assessment under paragraph 41 of Schedule 18. Discovery is the corporation-tax equivalent of the s.29 TMA power covered in our discovery assessments guide—the income-tax provisions in s.29 TMA 1970, with the corporation-tax equivalent at Sch 18 paras 41-44. Paragraph 44 contains the equivalent of the s.29(5) protection: no discovery assessment if HMRC could reasonably have been expected to be aware of the insufficiency from information made available before the enquiry window closed. The Realbuzz case discussed below is the R&D-specific application.

The Time Limits Running Against You

Diary every date as soon as the letter arrives. Three windows matter:

  • 30 days to appeal a closure notice or discovery assessment (paragraph 48(2) Sch 18).
  • 45 days is HMRC's window to complete a statutory review, if you accept the offer.
  • 30 days to notify the appeal to the tribunal once HMRC issues its review conclusion (or at any time if you skip review and go straight to the tribunal).

Missing the 30 days window forces you into a late-appeal application under the Martland three-stage test. The tribunal can grant late appeals, but it does not do so as a matter of routine.

Which R&D Regime Applies To Your Claim

R&D relief was substantially restructured by the Finance Act 2024 and the Finance (No. 2) Act 2023. Pre-merger and post-merger rules differ. Identifying which regime governs your claim is the first substantive step.

Pre-Merger SME And RDEC (Accounting Periods Before 1 April 2024)

Before 1 April 2024, two parallel schemes ran:

  • The SME scheme (Chapter 2 of Part 13 CTA 2009). Available to small and medium-sized enterprises. Mechanism: an additional deduction in computing trade profits—130% before 1 April 2023, reduced to 86% from 1 April 2023 (s.1044 CTA 2009)—and a payable tax credit on surrendered losses (s.1054 CTA 2009).
  • RDEC (Chapter 6A of Part 3 CTA 2009). Available to large companies and—critically—to SMEs whose claim was disqualified from the SME scheme, for example because the expenditure was subsidised or the project was contracted out. Mechanism: an above-the-line credit at 20% of qualifying expenditure (from 1 April 2023; previously 13%).

If your accounting period began before 1 April 2024, those are the rules. Several of the tests HMRC most often disputes—subsidised expenditure under s.1138 CTA 2009, subcontracted activities under ss.1133–1136—exist only in the pre-merger SME framework.

Merged Scheme And ERIS (1 April 2024 Onwards)

Schedule 1 to the Finance Act 2024 (commencement: SI 2024/286) replaced both schemes for accounting periods beginning on or after 1 April 2024 with a single merged regime, plus a separate stream for loss-making R&D-intensive SMEs.

  • Merged Scheme RDEC (new Chapter 1A of Part 13 CTA 2009). Section 1042B CTA 2009 sets the entitlement test (the company must carry on a trade, have qualifying expenditure, and not be ineligible). The credit rate is 20% (49% for ring-fenced oil and gas trades).
  • Enhanced R&D Intensive Support (ERIS). Available only to loss-making SMEs whose relevant R&D expenditure is at least 30% of total relevant expenditure (the "intensity condition", lowered from 40% by FA 2024). 86% additional deduction; 14.5% payable credit on surrendered losses. A grace-period rule allows continued ERIS if the company met the intensity condition in the immediately preceding 12-month period and made a valid SME or ERIS claim.

A separate Northern Ireland ERIS variant lifts certain overseas-contractor restrictions for NI-registered SMEs but caps relief by reference to a 3-year de minimis state aid limit.

Why The Regime Matters For Your Appeal

Different regime, different statutory tests. A subsidised-expenditure dispute under s.1138 CTA 2009 is a pre-merger SME problem—Quinn, Stage One, and Collins (below) are pre-merger cases. The post-merger merged scheme replaces the subsidised-expenditure mechanic with a different "decision-maker" concept; the case law from Quinn does not transfer cleanly. If HMRC's letter argues a point that does not match your accounting period's regime, that is itself a ground.

The Two Battles HMRC Will Pick

HMRC's R&D enquiry letters can be technical and overlapping, but at root the dispute will be one (or both) of two separable battles. Read the letter for which one HMRC is actually fighting—the answers, evidence, and witnesses you need are different.

Battle One: Is This R&D At All?

The substantive definition of R&D for tax purposes lives in section 1138 of the Corporation Tax Act 2010, which delegates to the Treasury, which in turn activates the BEIS/DSIT Guidelines via the Research and Development (Prescribed Activities) Regulations 2004 (SI 2004/712). The Guidelines have the force of law, confirmed in Stage One Creative Services [2024] UKFTT 1059 (TC). They were last updated on 7 March 2023 (clarifying that mathematical advances now count as science from 1 April 2023).

In plain English, the Guidelines ask three questions, all of which must be satisfied:

Is there a project that seeks an advance in science or technology? Paragraph 3 frames the test. Paragraph 6 makes clear that "advance" means improvement in overall knowledge or capability in the relevant field—not just the company's own knowledge. Paragraphs 9 to 12 carve out routine copying or adaptation. A project that uses existing technology in a new way is not, by itself, R&D.

Is there a scientific or technological uncertainty? Paragraphs 13 and 14 define this as knowledge that is not readily available or deducible by a competent professional working in the field. Uncertainty that a competent professional could resolve in a routine way does not qualify.

Did the work involve activities that directly contribute to resolving the uncertainty? Paragraphs 4 and 5 cover this, plus certain qualifying indirect activities.

The "competent professional" is not a generic phrase. Tills Plus Ltd v HMRC [2024] UKFTT 614 (TC) endorsed the formulation from Flame Tree Publishing Ltd v HMRC [2024] UKFTT 349 (TC): "someone who is able to demonstrate appropriate qualifications, experience and up-to-date knowledge of the relevant scientific and technological principles involved." HMRC scrutinises this carefully. A consultant's report from a non-specialist will not satisfy it.

What recent FTT cases show is that the substantive battle is usually won or lost on evidence, not legal argument. Five cases mark the pattern:

  • AHK Recruitment Ltd v HMRC [2020] UKFTT 232 (TC). HR/recruitment company; AI-based behaviour assessment project. Appeal dismissed. Key principle: the claimant must adduce evidence—typically witness testimony from the competent professional, subject to cross-examination—that the Guidelines are satisfied. Evidential failure means the claim fails. Heavily relied on in later cases.
  • Hadee Engineering Co Ltd v HMRC [2020] UKFTT 497 (TC). Engineering company. Mixed outcome—appeal partially allowed, most claims rejected. The consultancy declined to engage with HMRC's questions; descriptions of the technological advance were inadequate; contemporaneous documentation was thin. The Upper Tribunal decision is at Hadee Engineering Co Ltd & Ors v HMRC [2022] UKUT 84 (TCC).
  • Flame Tree Publishing Ltd v HMRC [2024] UKFTT 349 (TC). Publishing company; £266k claim. Appeal dismissed. Failure to adduce competent-professional evidence and to articulate, in Guidelines terms, what advance was sought and what uncertainty existed.
  • Tills Plus Ltd v HMRC [2024] UKFTT 614 (TC). EPOS/AI hospitality software. Mixed: the company won a payment-mechanism point but lost the R&D-eligibility battle because project descriptions were inconsistent and the competent-professional report did not match the work the subcontractor actually did.
  • Get Onbord Ltd (in liquidation) v HMRC [2024] UKFTT 617 (TC). Fintech; AI-enabled KYC verification. Appeal allowed. The competent professional did not have a formal software qualification but had substantial relevant experience; the tribunal accepted that integrating existing technologies in a novel way could constitute an advance. A useful counterweight to HMRC's restrictive software-claim posture.

The lesson is consistent across the four losses and the one win. The winners produce a competent professional who can describe, project by project, exactly what the advance was, what the uncertainty consisted of, and why the work could not be done by a routine application of existing knowledge. They have contemporaneous documentation. They can be cross-examined. The losers rely on retrospective consultant reports that are either too generic or do not match the work that was done.

Battle Two: Did The Relief Mechanics Apply?

Even where a project clearly is R&D, HMRC frequently challenges whether the claim qualified for relief on the specific mechanics: subsidised expenditure, contracted-out activities, the trade requirement, and the qualifying-cost categories.

Subsidised expenditure. Under s.1138(1)(c) CTA 2009 (in force for accounting periods beginning before 1 April 2024), expenditure was disqualified from the SME scheme if it had been "otherwise met directly or indirectly by a person other than the company." HMRC argued for several years that customer payments for completed work could subsidise the underlying R&D. The tribunal disagreed in Quinn (London) Ltd v HMRC [2021] UKFTT 437 (TC)—a construction contractor's case—holding that customer payment for the completed building did not subsidise the R&D. There must be a clear and direct link between the third-party payment and the R&D expenditure for it to be "met" by another. HMRC did not appeal, but began arguing the same point in later cases. The tribunal followed Quinn in Stage One Creative Services Ltd v HMRC [2024] UKFTT 1059 (TC) and Collins Construction Ltd v HMRC [2024] UKFTT 951 (TC), in each case rejecting HMRC's "indirect met" argument. After Stage One and Collins, HMRC announced it would not appeal and updated CIRD on 27 February 2025 to reflect both judgments.

That mid-enquiry shift has consequences. If HMRC opened your enquiry on a position it later abandoned in CIRD, that history may be relevant if costs become an issue. Our unreasonable conduct costs guide covers Rule 10(1)(b) and the scope of the cost regime.

Contracted-out activities. Pre-merger SME claims also failed if the R&D had been contracted out to the company by another party (ss.1133–1136 CTA 2009). Stage One is again instructive: the tribunal rejected HMRC's "freestanding R&D" argument because Stage One Creative Services retained autonomy over the R&D, owned the IP, and bore the financial risk—even though the underlying contracts were with end customers.

Trade requirement. Both pre- and post-merger relief require the company to be carrying on a trade. A pre-revenue start-up developing a product that is years away from commercial launch can fail this even where the underlying work is plainly innovative. Post-merger (s.1042B CTA 2009) Condition A imports the same point.

Qualifying-cost categories. Whether costs fall within staff, externally provided workers (ss.1127–1132 CTA 2009), software, consumables, or subcontracted R&D is a separate technical battle. Tills Plus is the leading recent authority on indirect payment routes for subcontracted work: faced with international sanctions on a payment to an Iran-based subcontractor, the FTT held that a purposive reading of s.1133(1) CTA 2009 allowed indirect payment via the director's father-in-law to count.

For drafting a paragraph 48 appeal that handles both eligibility and mechanics, see our grounds of appeal guide. The cleanest grounds separate the substantive issue (project-by-project Guidelines compliance) from the mechanics issue (subsidised, contracted-out, qualifying costs).

The New Procedural Traps

The Finance (No. 2) Act 2023 introduced two pre-claim notification regimes that catch many companies and their advisers off-guard.

The Claim Notification Form (s.1142A CTA 2009)

Section 1142A CTA 2009, inserted by paragraph 12 of Schedule 1 to F(No.2)A 2023, requires first-time claimants—and those who have not made an R&D claim in any of the previous three accounting periods—to file a Claim Notification Form. The window runs from the first day of the relevant accounting period until 6 months after its end. The requirement applies to accounting periods beginning on or after 1 April 2023.

The GOV.UK guidance sets out the mechanics. CIRD183000 was corrected after a transitional issue in late 2024 affecting amended-return claims; if your claim was caught by the original interpretation, that is potentially relevant procedural ground.

The Additional Information Form (Sch 18 Para 83EA)

Paragraph 83EA of Schedule 18 FA 1998, inserted by paragraph 13 of Schedule 1 to F(No.2)A 2023 and effective for R&D relief claims made or amended on or after 8 August 2023, makes the claim invalid unless the claimant company has provided the additional information specified in regulations no later than the date the claim is made or amended. The content of the form is set by The Relief for Research and Development (Content of Claim Notifications, Additional Information Requirements and Miscellaneous Amendments) Regulations 2023, SI 2023/813. The GOV.UK guidance and CIRD182000 describe what must be provided.

What Happens When A Claim Is Treated As Invalid

There is no general right of appeal against invalidity. If HMRC treats a claim as invalid for failure to file a Claim Notification or Additional Information Form, the company's route is to make a fresh, properly notified claim within the statutory time limit. If the time limit has passed, the relief is lost. Check the dates in HMRC's letter carefully against your filing record before accepting the invalidity point.

How To Check What Was Filed In Your Name

If your consultancy will not give you copies, you can still find out what HMRC actually received. Both the Claim Notification Form and the Additional Information Form are submitted through HMRC's online services. The CNF is a structured form covering basic company details, the agent making the claim, the period covered, and the contact for the senior R&D officer. The AIF requires project descriptions, a named competent professional, qualifying expenditure breakdowns by category, and an agent declaration.

Three practical routes:

  • Ask HMRC directly. Write to the case officer named in the enquiry letter and ask for confirmation of the date and content of any CNF and AIF held in respect of the accounting periods under enquiry. HMRC's compliance teams will normally provide this on request once an enquiry is open.
  • Make a Subject Access Request. A company is not a "data subject" under UK GDPR, but a director can make a SAR for personal data processed about them in connection with the claim—which often pulls back enough metadata to identify what was filed and when. The ICO guide to making a SAR sets out the mechanics.
  • Check the CT600 attachments. Your filed CT600 will show the boxes in which R&D relief was claimed and any computations attached. A current or successor accountant can pull this from the company's HMRC online services account.

If no CNF or AIF was filed when one was required, that is a different problem from the eligibility battle—and it changes which arguments matter. Get the question answered before drafting grounds.

Burden Of Proof: Who Has To Prove What

R&D appeals split the burden across two issues, and the split shapes how you prepare evidence.

  • On the underlying R&D claim, the burden is on the company. Tribunal practice on substantive corporation-tax appeals applies the same principle as section 50(6) TMA 1970: the assessment stands unless the appellant displaces it. That is why AHK Recruitment, Flame Tree, and the consistent thread through the Guidelines cases turn on whether the appellant produced credible competent-professional evidence. If you offer no project-by-project case for what advance was sought and what uncertainty existed, you lose by default.
  • On penalties, the burden is on HMRC. HMRC must prove the inaccuracy was careless or deliberate before any penalty bites. That is why the Auxilium and Tooth subjective-knowledge tests matter: HMRC has to demonstrate the behaviour, not assume it from the underlying assessment.

The practical implication: gather your own evidence on substance (witness statements, contemporaneous project records, the AIF and consultancy materials, the qualified competent professional ready to give live evidence). Make HMRC do its work on penalties (test their behavioural assertions; force them to evidence each element of careless or deliberate conduct).

Penalties And Personal Liability

R&D inaccuracies attract penalties under Schedule 24 FA 2007—the standard inaccuracy-penalty framework. For the regime end-to-end, see our HMRC penalties explained guide.

Careless Vs Deliberate Behaviour

Schedule 24 paragraph 3 defines three culpability levels (the standard maximum percentages are then set in paragraph 4 and the minimum percentages after disclosure reductions in paragraph 10):

  • Careless—failure to take reasonable care. Penalty range 0–30% of potential lost revenue.
  • Deliberate but not concealed. Range 20–70%.
  • Deliberate and concealed. Range 30–100%.

The actual percentage within each range depends on negotiated reductions for telling HMRC, helping HMRC, and giving HMRC access. Suspended penalties are available in some careless cases under paragraph 14, but not for deliberate behaviour.

The deliberate test is subjective. HMRC must prove the director knew the claim was inaccurate—the test in Auxilium Project Management v HMRC [2016] UKFTT 249 (TC) is consistent with the Supreme Court's approach in HMRC v Tooth [2021] UKSC 17, which we cover in our Tooth on deliberate inaccuracy analysis. For an R&D director who relied on a consultancy whose advice has since unravelled, the subjective test matters: a director who genuinely did not know the claim was wrong cannot be characterised as deliberate, though "careless" remains in play.

Worked Exposure Example

To make the numbers concrete, take a profit-making SME claim for an accounting period ending 31 March 2023, where HMRC denies the 130% additional deduction on £100,000 of qualifying spend (the original £100,000 spend remains deductible as a normal trade expense; HMRC removes only the £130,000 uplift).

  • Additional CT due: £130,000 × 19% (the FY2022 main rate) = £24,700
  • Penalty if careless, top of range (30%): £7,410. After full disclosure reductions to the floor (0% for unprompted; 15% for prompted), the floor for prompted disclosure here is around £3,705
  • Penalty if deliberate not concealed (20–70%): £4,940 to £17,290
  • Penalty if deliberate and concealed (30–100%): £7,410 to £24,700
  • Interest at the current 7.75% (Bank base rate plus 4%) for, say, 18 months: roughly £2,870

A careless prompted-disclosure outcome therefore lands somewhere around £24,700 tax + £3,705 penalty + £2,870 interest ≈ £31,300. A deliberate-and-concealed worst-case is £24,700 + £24,700 + £2,870 ≈ £52,300, with paragraph 19 director-liability exposure on top of the company's penalty.

For a loss-making SME that received a payable credit, the clawback works differently—HMRC recovers the credit paid (14.5% of surrendered losses pre-April 2023; check the rate for your period) plus penalties calculated on the relief over-claimed. The same percentage ranges apply.

These are illustrative figures. Verify the rates that applied to your accounting period before relying on any number.

What Reasonable Care Looks Like When You Used A Consultancy

Reliance on a properly engaged adviser can support a reasonable-care defence. Schedule 24 paragraph 18 makes clear that an agent's act or default does not absolve the company, but the company can still rely on reasonable care if it took its own reasonable care. The leading FTT formulations are David Collis v HMRC [2011] UKFTT 588 (TC) and Atkinson v HMRC [2016] UKFTT 387 (TC): the standard is the prudent and reasonable taxpayer in the appellant's position. Clynes v HMRC [2016] UKFTT 369 (TC) is fact-specific—the appellant there was a qualified accountant—and HMRC sometimes over-extends it.

What courts look at when a director relied on an R&D consultancy:

  • How was the consultancy engaged? Were credentials checked? Was the engagement letter clear?
  • What information did the director give the consultancy? Were the project descriptions accurate? Were the staff and time records reliable?
  • Did the director review the output? Did they read the Additional Information Form before it was filed? Did anything in the report look obviously wrong?
  • When HMRC raised the enquiry, did the director engage promptly?

A reasonable-care defence is fact-heavy. The general framework is in our reasonable excuse guide and the four-step framework from Perrin v HMRC [2018] UKUT 156 (TCC) covered in our Perrin v HMRC analysis. The reasonable-care test for inaccuracy penalties under Sch 24 is closely related but not identical to reasonable excuse for late filing.

If The Consultancy Has Gone Silent

The consultancy disappearing is a procedural problem and an evidential one. Working through it methodically protects both the appeal and any separate remedy:

  • Put requests in writing, by post and email, to every known address. Recorded delivery for the postal version. Keep the receipts. A paper trail of unanswered requests is itself part of the reasonable-care story.
  • Ask HMRC for what was filed. Use the SAR / case-officer route in the previous section. You may not need the consultancy's cooperation to find out what they submitted in your name.
  • Check Companies House for the consultancy's status. A consultancy in liquidation, dissolved, or struck off is not coming back—this changes who you can pursue and how. Look at the Companies House register.
  • Check professional bodies if the consultancy claimed credentials. CIOT, ICAEW, ATT, and the SRA all run public registers. If credentials were misrepresented, that affects your reasonable-care defence and any consumer-protection complaint.
  • Send a letter before action for the working papers. A short letter giving 14 days to provide the file, citing the regulatory or contractual basis, sometimes shakes loose what email pleas do not. Keep tone professional and factual.
  • Preserve all old emails, attachments, contracts, and engagement letters now. Disable any auto-archive that might delete them. Export to a separate location. A reasonable-care defence and a possible negligence claim both depend on contemporaneous evidence you may not be able to recreate later.

If you may have a separate professional-negligence claim against the consultancy, the limitation period is generally six years from the negligent act under section 5 of the Limitation Act 1980, or—where you discover the damage later—three years from the date of knowledge under section 14A, with a 15-year long-stop under section 14B. Those clocks run independently of the tribunal timeline. Preserving evidence now keeps that option open even if you decide later not to pursue it. Negligence litigation sits outside the tribunal's jurisdiction and outside this guide.

Director Liability Under Sch 24 Para 19

Paragraph 19 of Schedule 24 allows HMRC to pursue officers of a company personally for the deliberate-inaccuracy portion of a penalty, where the inaccuracy is attributable to the officer. This is a real risk for directors who signed off claims they knew were dubious—but it is the same subjective test as Auxilium and Tooth. HMRC must prove the director's actual knowledge. A reasonable-care defence on the underlying penalty—if successful—removes the foundation for paragraph 19 liability.

Your Procedural Rights

Once you have read the closure notice or discovery assessment, three procedural choices come up immediately.

The 30-Day Appeal Window

Appeal in writing to HMRC within 30 days of the closure notice or assessment. The notice itself should state the appeal address and the appeal route. State grounds—even outline grounds with "full grounds to follow" protect the deadline.

A protective appeal letter at minimum names the company and UTR, identifies the closure notice or assessment by date and accounting period, states "I appeal", gives outline grounds (for example: "the expenditure is not subsidised within section 1138 CTA 2009, applying Quinn (London) Ltd"), and confirms full grounds will follow within a reasonable period. For the structure, see our writing grounds of appeal guide.

Optional Statutory Review (45 Days)

HMRC will usually offer a statutory review—a different officer reviews the decision within 45 days. Review is free, does not close off the tribunal, and can resolve clear errors of law without the cost and delay of formal proceedings. Around around 56% of reviewed decisions are cancelled or varied in the taxpayer's favour, though that figure is across all dispute types and not specific to R&D. Our HMRC internal review guide explains the mechanics. Review is most useful for discrete legal points (a clear procedural error on the Claim Notification Form, an obviously misapplied Quinn argument). Less useful for fact-heavy battles on Guidelines compliance.

Notice Of Appeal To The Tribunal

If review fails, or you skip review, you notify the appeal to the First-tier Tribunal within 30 days of the review conclusion (or at any time after the original 30-day appeal). The mechanics are in our how to appeal to the tax tribunal guide. There is no fee. R&D appeals are typically allocated to Standard or Complex track—large RDEC cases routinely Complex—and Complex track carries cost-shifting risk unless you opt out within 28 days. Smaller R&D claims can land in Default Paper or Basic track, where the costs regime is materially different. See our tribunal tracks and costs guide.

Cases take typically 6-12 months to a decision, though R&D cases often run longer because they are evidence-heavy. Expect to give live oral evidence yourself in addition to your competent professional—witness statements are exchanged before the hearing and you can be cross-examined. The mechanics of bundles, statements, and skeleton arguments are in our preparing for your tax tribunal hearing guide. After the hearing, our after your tax tribunal decision guide covers written reasons, set-aside, and onward routes. If matters go further, the Upper Tribunal route is on points of law only.

Postponing Payment While You Appeal

If HMRC has already paid a credit and now wants it back, the closure notice will produce an immediate payable amount. Without postponement, that amount is due, and interest accrues at 7.75% (Bank of England base rate plus 4%). Postponement is not automatic: you must apply in writing under section 55 TMA 1970—usually as part of the appeal letter—identifying the amount in dispute and the grounds for considering it overcharged. Postponement keeps the disputed amount frozen pending appeal. See our postponing payment during appeal guide.

Where settlement is on the table during the dispute, our settling your tax tribunal case guide covers section 54 TMA agreements, contract settlement letters, and the deemed-settlement traps that catch unwary appellants.

If HMRC simply refuses to pay a credit you have not yet received, there is nothing to postpone—but interest exposure is still real if you later lose: any underpaid corporation tax for the year attracts interest from its original due date.

Discovery Assessments And The Realbuzz Defence

Where HMRC missed the original 12-month enquiry window under paragraph 24, a discovery assessment under paragraph 41 of Schedule 18 is the only route open to it. Paragraph 44 limits the power: no discovery assessment if HMRC could reasonably have been expected to be aware of the insufficiency, on the basis of information made available before the enquiry window closed.

Realbuzz Group Ltd v HMRC [2025] UKFTT 493 (TC) is the recent R&D-specific application. The company's £335k R&D claim for the accounting period ending 30 April 2020 was disallowed by a discovery assessment. The 2020 claim had been submitted with a detailed R&D report. The FTT held that a hypothetical officer could reasonably have been expected to be aware of the (potential) insufficiency before the enquiry window closed. Discovery assessment invalid; appeal allowed.

Realbuzz illustrates how a contemporaneous, detailed R&D report can give protection under paragraph 44—not "will" give protection, because the test is fact-specific and depends on what information was actually before HMRC. But it underlines a practical point that runs through the whole R&D evidence battle: the report you file with the claim does double duty. Substantively, it is the foundation of your competent-professional evidence. Procedurally, it is the foundation of any later paragraph 44 defence.

Six Things To Do This Week

  1. Calendar every deadline. 30 days from each closure notice or assessment. 45 days for any review. 30 days from a review conclusion to the tribunal. 28 days from track allocation if you want to opt out of Complex.

  2. Demand a copy of every document HMRC is relying on, in writing. You are entitled to know the basis for the assessment and to see what HMRC has gathered.

  3. Get the original consultancy's working papers. Project descriptions, time records, technical reports, the Additional Information Form. Put your request in writing—a paper trail of attempts to engage matters for any later reasonable-care argument, and may matter separately if you later decide the consultancy's conduct is itself an issue.

  4. Consider independent advice—and choose carefully who you take it from. A second opinion is most useful from an adviser with no commercial stake in the outcome. Realistic options: a Chartered Tax Adviser via CIOT's Find a CTA directory, a chartered accountant via ICAEW's Find a Chartered Accountant, or a specialist tax barrister via the Bar's Public Access Scheme. All should work on hourly or fixed fees. Be wary of "no win no fee" R&D specialists at this stage—a contingency model is what created the conditions for many of the cases HMRC is now challenging. For company disputes below ~£20,000 in tax at stake, TaxAid cannot usually help corporates but can sometimes refer to a low-bono volunteer; the LITRG is similarly individual-focused. For corporate disputes, expect to pay—but a few hours of well-targeted advice often reshapes the dispute decisively.

  5. Prepare a Guidelines-anchored response project by project. For each project, what was the advance, what was the uncertainty, and who was the competent professional? Map your facts onto Guidelines paragraphs 3, 6, 9–14, and 13–14.

  6. Consider statutory review before going straight to tribunal. It is free, it preserves all your tribunal rights, and a fresh pair of HMRC eyes on the decision—within 45 days—sometimes resolves the dispute.

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This article is for informational purposes only and does not constitute legal or tax advice. For advice specific to your situation, consult a qualified tax adviser, accountant, or solicitor.

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