R&D tax relief
A buyer or investor is looking hard at your R&D claims
Somewhere in a funding round or sale process, R&D tax relief claims (past or present) have become a specific line item in due diligence. That's normal, not a bad sign in itself, but it's worth understanding why R&D draws this level of attention and what the review is actually trying to establish.
Why R&D specifically, not just tax generally
A claim already paid out is a contingent liability, not a settled fact
An R&D claim that's already been paid, or offset against corporation tax, feels like a closed matter to the company that filed it. To a buyer or investor, it's something closer to a contingent liability, because HMRC can still open a compliance check on a filed claim within the normal enquiry window, and if that check reduces or reverses the relief, the company owes money back, sometimes with interest. That's exactly the kind of risk due diligence exists to price, and it's why a buyer's advisers ask for the claim's actual working papers, not just the amount that landed in the accounts.
What tends to get asked for
The narrative and the numbers, not just the headline figure
A serious review generally wants the technical narrative for each claimed project, the cost breakdown behind the figure, and confirmation of who prepared the claim and whether they're still contactable. That's similar in substance to what HMRC itself would ask for in an enquiry (see what an HMRC enquiry typically asks for). If a claim was prepared by a firm that's since ceased trading or become unreachable, that's its own flag in a diligence process. See what to retrieve when an adviser firm has collapsed for what should exist and how to get hold of it.
The other angle: timing and eligibility around the deal itself
Funding events can change what a company can claim, not just how the claim reads
Beyond reviewing historic claims, the transaction itself can affect eligibility going forward. Certain funding structures and grant income interact with which R&D scheme a company sits under and how costs are treated, and a deal that changes ownership or funding mix partway through an accounting period can complicate a claim that spans it. This is genuinely deal-specific and worth raising with a specialist adviser early in the process, not discovered after terms are agreed.
What this review is actually trying to establish: not whether the company ever made a mistake (most companies with an active claims history have something worth tightening up), but whether the exposure is bounded and understood, or unknown. A company that can produce clean working papers and speak plainly about a past weakness is in a stronger position than one that can't, even if the underlying claim history looks identical on paper.
What the review tends to surface
Two different findings, two different next steps
If the review turns up qualifying work that was never claimed, or a claim that could be built more robustly than it was, that's an opportunity rather than a problem (see R&D claim services for what building or improving a claim actually involves). If it turns up a past claim that genuinely looks overstated or poorly evidenced, that's worth addressing proactively rather than leaving it to surface later (see unwinding a claim you suspect was wrong).
Decision helper
Alternatives and limitations
This page covers why R&D claims draw scrutiny in a deal process and what tends to get asked for, not the mechanics of a specific transaction. That's a job for your corporate finance and tax advisers working from the actual deal terms. And if a formal HMRC enquiry is already open on a claim under review, that changes the timeline for the deal itself: see an HMRC enquiry has opened.
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Adam Parker
Founder of Muswell Rose Consulting Ltd, which trades as Established Finance · former Managing Director of Penny, an invoice finance business, working in mortgages, commercial finance and fintech lending since 2010 (career history).
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Practical questions
Before you get in touch
Is an R&D claim that has already been paid out still a risk in due diligence?
Yes. While the enquiry window is open HMRC can still reduce or reverse the relief, so a buyer treats it as a contingent liability.
What does a due diligence review of R&D claims usually ask for?
The working papers: each project's technical narrative, the cost breakdown, and who prepared the claim.
What is a due diligence review actually trying to establish?
Whether any exposure is bounded and understood, rather than whether the company ever made a mistake.
What information do I need?
To start, just a description of what’s actually happening in the business. If it progresses, the provider will ask for the usual things: recent accounts, a sense of turnover and trading history, and details of the specific need.