R&D tax enquiry case studies

Avalon Tax was asked to help in a medical technology case at the R&D tax enquiry appeal stage. HMRC had fully rejected an R&D tax relief claim worth £260k and issued a closure notice demanding repayment.

The company had developed a class II medical device to help treat type 2 diabetes. Despite detailed evidence, HMRC dismissed the claim after limited correspondence and appeared to misunderstand the science and technology involved. 

Avalon Tax prepared a detailed 12-page appeal letter exposing inconsistencies in HMRC’s approach. We highlighted relevant supporting evidence, including publicly available NICE medical evaluations that referenced the company's work, set out in clear terms how the project was an advance in line with the BEIS/DSIT guidelines, and highlighted examples in HMRC’s own guidance that confirmed similar activities qualified as R&D for tax relief purposes. A few weeks later, HMRC overturned its original decision and accepted the claim.

Result: £260k R&D tax relief secured after Avalon Tax’s first appeal letter.

An environmental science company came to Avalon Tax after HMRC had rejected their R&D tax claims covering two successive years. They had originally filed without an R&D tax adviser and, after two rounds of correspondence, HMRC still refused to accept their claims as qualifying.

By the time they approached us, the company was understandably very concerned and unclear about what HMRC needed to see to successfully resolve the R&D compliance check.

Their project work focused on advancing knowledge and capability in the area of carbon sequestration and explored new methods for removing carbon from the atmosphere to help reduce climate impacts. The projects were led by highly qualified competent professionals, including Master’s degree level specialists in environmental science. This was a relatively new and emerging field at the time, and one the HMRC caseworker was unlikely to have encountered before.

The R&D tax enquiry was being handled by HMRC’s Individuals and Small Business Compliance (ISBC) department. From our inside knowledge of HMRC’s workings, we knew that while ISBC had access to some software specialists via CDIO, they had no equivalent expertise in environmental science. We presented the advance, baseline and uncertainties in a way the caseworker could easily understand. Within just four weeks of our engagement, the first enquiry was closed, and after further correspondence, the second enquiry was concluded a few weeks later. Both claims were accepted in full, with 100% of the R&D tax relief being upheld.

Result: Two previously rejected R&D tax claims accepted in full and 100% upheld.

An award-winning Ed-tech company came to us after HMRC had issued a conclusion letter rejecting their R&D tax credit claim in full. By that stage, HMRC was already demanding repayment of their £650,000 R&D tax credit, and the company was just days away from the 30-day appeal deadline.

Despite repeated requests by the claimant during the R&D tax enquiry , HMRC had refused all requests to meet with the company. We stepped in and produced a detailed report for the client, analysing their claim and identifying where HMRC’s understanding of the information provided had fallen short, as well as setting out the next steps available to the client in terms of appealing the HMRC decision. 

The claimant was a long-established business with more than a decade of experience developing advanced software for the education sector. Their technology was used by more than 2,000 schools, supporting over 2 million students. Their development team included many highly qualified and experienced software engineers, developers and Master's educated Computer Scientists. The projects being claimed for were a small subset of their wider research and development activities, and limited to those projects which sought to overcome genuine technological uncertainties. 

We managed the case through the appeal stages, including review by the Solicitor’s Office (now HMRC Legal Group) and Alternative Dispute Resolution (ADR). We also prepared the case for tribunal listing following an initial Solicitor’s Office rejection. HMRC ultimately accepted our arguments in full, with the entire R&D claim agreed under s54 TMA 1970 ahead of the tribunal hearing.

Result: R&D compliance check successfully concluded and £650,000 R&D tax relief secured in full with no adjustments.