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Accountants looking to help clients with R&D are keenly aware of the different ways that HMRC can impose the rules of R&D tax relief claims.
While there has been an effort to understand R&D tax relief enquiries in the wake of the Mandatory Random Enquiry Programme (MREP), claims may be subject to a Fraud Investigation Service (FIS) check.
Innovative businesses and accountants both need to understand what to do in the event of an FIS check.
What triggers a Fraud Investigation Service check?
FIS checks can be triggered as part of the MREP, but there are some key things that increase the likelihood of them occurring.
Financial irregularities are the main reason why an FIS check would occur.
This could mean that the numbers do not entirely add up, or there seems to be an exceptionally high allocation of costs that generally do not attract such levels of expenditure.
If an accountant is confident in their work, then there may either be no error or a misunderstanding of what can be claimed in an R&D tax relief claim.
The technical narrative and details of the project can also raise concerns about the R&D tax relief claim.
If the information in an R&D tax relief claim is too similar to a claim that has been submitted previously, it may be treated as a fraudulent claim.
The likelihood of this happening with a claim compiled by humans is quite low, but the advent of AI-written claims may make this type of query more common.
It is not advisable to use AI to write R&D tax relief claims due to the lack of data protection involved, but the fear of an FIS check should further disincentivise its use.
Using a disreputable R&D tax consultant can also increase the chances of an FIS check, so be sure you know the people you work with can be trusted.
What should you do when you receive an FIS check?
Staying calm when dealing with an FIS check is vital.
Both the innovative business that gets the letter and the accountant who has assisted with the R&D tax relief claim may feel alarmed at the perceived severity of the FIS check.
Like with an R&D tax relief enquiry, there may be a reasonable way to defend the claim and preserve the full value.
Seeking the support of a trusted R&D tax consultant is vital for knowing how to proceed.
However, be aware that HMRC also has the power to simply remove the R&D claim and the benefit derived from it via your Corporation Tax return without recourse or explanation under Section 18 of the CTA 2009 if they suspect fraud.
They do not have to respond to requests to explain why they have done this, but in this case the claimant does have a three-month window to refile their claim, even if the two-year amendment window has passed.
This would allow you to potentially address any flags or errors that HMRC may have picked up on or leave the claim as is.
Either way, the claim is very likely to be picked up for a normal R&D Compliance Check and assessed in this way.
How we can help with an FIS check
Our expert team are fully prepared to assist with standard R&D tax relief enquiries and with FIS checks.
There will be around five questions that need answering, with most of them centring on the finances of the claim.
It is likely that only one question will address the advance itself, but this should be treated as seriously as the financial questions.
We can review the claim, even if we did not help to compile it, to make it clear where HMRC’s concerns are coming from.
If some parts of the claim are illegitimate, we can help to remove them and mitigate the penalties that HMRC may wish to impose.
Our experts will also work with you to improve the quality of R&D tax relief claims to reduce the risk of future FIS checks.
FIS checks need to be carefully managed to avoid further compliance issues and our team can help.
If you are concerned about managing FIS checks, get in touch with our team today.
Adam Bointon is a Technical Director specialising in R&D Tax Credits for SMEs in manufacturing and software sectors. With over 15 years’ experience, he works closely with businesses to identify qualifying R&D activities and prepare clear, compliant claims. He combines technical expertise with a strong understanding of economics and finance to support successful outcomes. Adam also contributes to industry webinars and CPD sessions, sharing insights on R&D tax relief and HMRC requirements.
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