R&D tax relief claims can represent a hidden liability during financial or tax due diligence if they have not been prepared correctly. HMRC has become far more active in reviewing R&D claims, and if previous submissions are found to be non-compliant, the buyer may inherit the risk of enquiry, repayment, penalties or wider tax exposure.

A structured R&D due diligence review helps both buyers and sellers identify risks early and avoid unexpected issues later in the transaction process.

In most cases, it is recommended that historic R&D tax relief claims are reviewed across the previous three to four accounting periods. However, the appropriate timeframe will depend on the transaction structure, your objectives and whether any claims remain open to HMRC enquiry.

If earlier claims show recurring patterns or potential issues, it may be advisable to review further back in order to understand the full risk profile of the business.

Most R&D tax relief due diligence reviews take between 3 and 10 working days, depending on several factors including:

• the number of historic R&D claims submitted
• the number of projects included within each claim
• the quality of supporting documentation
• how embedded R&D activity is within the business
• the overall transaction timeline

Reviews are always structured to fit within deal deadlines, recognising how tight transaction windows can be.

For sell-side instructions, it is advisable to begin the review when preparing the business for sale. As this preparation can take several years, an early review can prevent the repetition of historic mistakes.

To carry out a historic R&D claim review, the following documents are typically required:

• historic R&D tax relief computations
• technical narratives or project descriptions
• detailed cost breakdowns
• timesheet records or cost apportionment methodology
• subcontractor and externally provided worker (EPW) evidence
• any correspondence with HMRC regarding previous claims

If some documentation is missing, it is often still possible to proceed with the review while identifying where further clarification may be needed.

Yes. R&D tax relief due diligence is often carried out as part of a wider transaction process alongside legal, tax and corporate finance advisers.

Support can include:

• written R&D claim risk assessments
• input for warranties and indemnities
• explanations suitable for non-technical audiences
• clear recommendations to support the negotiation process

The work is structured to support advisers and investors while keeping the analysis clear and practical for all parties involved.

Yes. If weaknesses or risks are identified during the review of historic R&D claims, several actions can be taken, including:

• preparing corrections or amendments to claims
• strengthening supporting documentation
• improving or updating technical narratives
• improving compliance processes for future R&D tax relief claims

For sellers, this helps present a clean and defensible file during due diligence. For buyers, it helps shape post-completion improvements and risk mitigation.

This approach is shaped not only by advisory experience but also by first-hand involvement in businesses undergoing both buy-side and sell-side due diligence, including during a transition from venture capital (VC) to private equity (PE) ownership.

This experience provides insight into the commercial pressures, the investor mindset and the importance of delivering clear, defensible answers quickly.

The focus is on providing practical, real-world guidance rather than purely theoretical advice.

No. R&D tax relief claims arise across a wide range of sectors, not just technology or scientific businesses.

Reviews have supported organisations in areas such as:

• engineering
• software and digital development
• manufacturing
• clinical research
• professional services
• food and beverage
• environmental and sustainability technologies

If a company has prepared an R&D tax relief claim, the claims can be reviewed as part of the due diligence process.

Yes. Smaller companies preparing for an investment round or their first acquisition often benefit from an early review of their in-house R&D tax relief claims to ensure they are robust and defensible.

A short housekeeping review can identify potential issues early and prevent stress or delays later in the transaction process.

Yes. Every review includes a clear, plain-English written summary covering:

• risks identified within historic R&D claims
• areas of strength within the existing documentation
• HMRC compliance observations
• recommended next steps

Reports can also be tailored for corporate finance advisers, lawyers or private equity teams involved in the transaction.