beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Corporate Intangibles Research and Development Manual

R&D tax relief: large company scheme: Updated Large Business practice note

Overview and roles
Approach to Claims and assurance work
Time limits
Research and Development Expenditure Credit


Large Business (LB) deals with the tax affairs of the largest businesses in the UK, and therefore receives claims from companies conducting significant and substantial research and development (R&D) programmes.

Overview and roles

The government continues to wish to encourage companies to undertake research and development and one way of supporting this is R&D tax reliefs.

The Government wants companies undertaking research and development to get the incentives to which they are entitled in a simple way that gives them:

  • Early certainty (even though R&D is not part of a formal clearance regime).
  • The ability to plan R&D activities in the knowledge of the incentives they will receive.

Where companies are undertaking qualifying R&D work LB has taken steps to ensure our approach complements these objectives. This involves working with customers to understand the commercial context to their activity, and being supportive should the company face any problems in assessing whether its work is qualifying R&D and, if so, how much tax relief it is entitled to.

It is vital that we balance these objectives against the need to make legitimate enquiries into R&D claims where our risk assessment indicates a possible problem. The paragraphs below (under Procedure) set out what we will do to achieve this balance and our general approach to R&D claims.

Roles and responsibilities

From 2014/15 LB is responsible for dealing with its customers’ R & D claims. Each region has a Theme Specialist. All relevant claims should be referred to them.


Steve Williams – LB R & D Theme Lead. Tel: 03000 544819.

Karen Duffy - LB R & D SRO. Tel: 03000 514043.


Top of page


Claim Facilitation

Officers in LB are in regular contact with the customers who they are working with and seek to develop an in-depth understanding of the structure and activities of the businesses.

Our intention is to work with our customers so that we understand the operation of their businesses. This will inform our risk assessment process and set the tone for our work with them. Claims to R&D tax relief are a prime area where this understanding can pay dividends to both our customers and LB so we will:

  • Encourage early and ongoing contact from our customers to determine whether they are undertaking (or will be undertaking) qualifying R&D activity.
  • Work with customers to enable them to develop simple procedures, which will result in acceptable claims. In general, these should draw from and fit with the company’s existing processes and accounting systems to avoid a disproportionate amount of extra work being needed to formulate the R&D tax relief claim.
  • Encourage customers to include in these simple procedures:
    • The decision-making scientists / engineers in the company who lead and undertake R&D activities, ensuring these staff have an understanding of what activities may qualify for relief,
    • Input from experienced engineers / scientists to decide whether there is the requisite scientific or technological uncertainty in the activity to qualify and that there is a record of this decision making,
    • An identified start and end of qualifying activities.
  • Advise customers what records we will expect to see in support of their claims and, in particular, advise on what documentation might assist the determination of whether or not the R&D in question qualifies.
  • Ensure that the process identifies the costs of qualifying staff (employees and externally provided workers), consumable items and software and so satisfy ourselves that the process, if followed correctly, will produce an appropriate R&D tax relief figure.
  • Ask customers to identify any ‘problem areas’, where they are not certain if the R&D will qualify for relief, for early discussion.

    Our customers have a significant role to play in this process and we need them to be:

  • open and clear about their R&D activities
  • helpful and co-operative.

This will allow us to reach a mutually acceptable position as quickly as possible so that LB can provide the early certainty that our customers need.

The CCM and Theme Specialists will have a key role in encouraging dialogue with customers about their R&D work and helping them to develop processes designed to formulate claims.


Top of page

Approach to Claims and assurance work


LB has developed a process for dealing with claims that allows HMRC to focus on the areas of highest risk. For this process to be effective, case teams and Theme Specialists need to work in partnership, bringing together their specific R&D expertise and knowledge of the customer.

All case teams should follow this process.

It should be noted that there are three scenarios where a Theme Specialist must undertake a risk assessment for R&D claims:

  • R&D claim by a non-low risk customer
  • Any first time RDEC claim, regardless of customer’s risk status
  • R&D expenditure >£25M

If the risk assessment does not demonstrate either an absolute or relatively significant tax risk in relation to the business then, excepting where challenge may be needed for sector or R&D regime integrity, the claim should be accepted. This will particularly apply where we have agreed the content of the claim up front with the business.

If we need to enquire into the claim we will seek an early opportunity to discuss it with the customer. It would be helpful for us to have access to the people within the company undertaking the R&D work so that we can discuss our concerns directly with them, as well as accounting or finance staff who have prepared the submitted claim. Our aim here is to minimise compliance costs and to identify ways in which the customer’s processes can be amended, where necessary, to produce acceptable claims in the future.

Despite our best efforts, the customer may fail to put acceptable processes in place or it may persist with incorrect claims.  As a consequence there may be significant risks to the Exchequer.  In such cases, formal enquiry procedures will be adopted, including the use of information powers and the consideration of penalty proceedings.


Top of page


LB accepts that there may be occasions where the extent of the work that would be required to follow through and formulate a claim would be disproportionate compared to the benefit received. LB do not want to discourage claims being made.  So, in such circumstances, LB will be open to the use of sampling techniques where:

  • These techniques can be relied upon to give a reasonable answer in the circumstances, as ‘harder’ information is not available to produce and support the claim;
  • The process involved in arriving at the sample is transparent, open and utilises the information that is held and available from the business in a way that gives an answer consistent with the work and cost incurred by the business;
  • LB is provided with full supporting detail of both the underlying information and assumptions relied upon and is given the opportunity to challenge not only the final sample but also all the information used by the business, if appropriate.


If businesses wish to use sampling, the methodology, potential size / nature and reasons for relying on this technique will need to be discussed and agreed in advance.  This is because the use of sampling may lead to a less accurate claim.  Customers should not expect that agreement will be given to the use of sampling in all circumstances. LB will need to be sure that there are valid reasons why a more substantive claim cannot be made. LB may want to explore those reasons and consider carefully what the difficulty in producing a substantive claim may say about the quality of the underlying records and source data.

Responsibility for working any enquiry will remain with the LB CCM and customer team, with support from the Theme Specialist.



Top of page

Time limits

A claim to R & D can only be made in a return or an amended return. The normal 12 months following the filing date time limit applies. For a standard 12-month or a shorter Accounting Period (AP) this will be 2 years from the end of that AP. Any late claims will have to be made and considered in accordance with SP5/01.

            Late claims to R&D relief

  1. Company makes a late claim to R&D relief.
  2. If not already made under SP5/01, send a copy and request, either a withdrawal of the claim or a claim within SP5/01.
  3. R&D Specialist reviews the claim.
  4. Pass to the Grade 6 Decision Maker (Steve Williams – R&D Theme Lead) to make their decision.
  5. If the decision is to refuse the claim, forward the template at CIRD 81800 to SPOC (currently Andy Bostock in Manchester Incentives and Reliefs Unit). Send the papers by Track and Trace.
  6. SPOC confirms (or otherwise) that the decision is consistent with HMRC policy and approach.
  7. Decision Maker sends the decision to the Company.





Top of page

Research and Development Expenditure Credit (RDEC)


This was previously known as the Above The Line Credit and was introduced from 01/04/2013. For tax purposes it is treated as a taxable grant.

 LB will pay any RDEC claim as soon as possible.

Delays may occur where:

(1) We identify a risk with the RDEC claim, or

(2) HMRC is aware of liabilities across the entity / corporate group or other issue that means it would not be appropriate for a payment to be made.

In the event of (1), the case team will discuss with the customer whether it is appropriate to make any payment on account of a portion of the RDEC claim while the risk is being resolved. This will be decided on a case by case basis.

For the purposes of (2), liabilities across the entity / corporate group include all known liabilities payable to HMRC. They also include liabilities that may not yet have been formally raised by HMRC but have been agreed in principle with the customer.

For the purposes of (2), “other issue” can include, but not be limited to, situations where the customer is likely to incur liabilities across any head of tax and there is a concern about their ability to meet these liabilities.

For the purposes of (2), “other issue” does not include situations where a wider risk assessment is due to take place by HMRC at some later date, and there are no underlying concerns regarding the customer’s ability to fund liabilities incurred as a result of any enquiries arising from that risk assessment.