When XL Industries decided to claim R&D tax credits for the first time, they had no idea they'd soon be facing an HMRC compliance check. But thanks to the right support and preparation, what could have been a stressful experience became a straightforward success.
A Manufacturer Breaking New Ground
XL Industries has spent over two decades as France's only manufacturer of rack and pinion lifting machinery, delivering both standard and custom solutions across France, the UK, and Australia. Their innovative work in developing bespoke lifting solutions made them a perfect candidate for R&D tax credits. They just needed help navigating the claim process.
When the company first reached out for support, they were interested in a full-service option where experts would handle everything based on team interviews. They asked Myriad to quote for this service. However, the team at Myriad had a better suggestion: given their project size, the self-service platform Tax Cloud would be more suitable and cost-effective.
For Brieuc Troadec, the Country Manager who led the project, this was welcome news.
Using Tax Cloud to Make an R&D Tax Credit Claim
Despite being his first time filing such a claim, Brieuc found Tax Cloud straightforward to use: "the platform is very efficient and the explanations on it are quite clear".
The claim process required just a couple of rounds of feedback on Tax Cloud. Technical reviewers and tax analysts examined the submission carefully, asking for additional detail on specific technological uncertainties to ensure everything met HMRC's requirements. The XL Industries team provided the necessary information, appreciating how the platform guided them through what could have been a complex process.
The submission included an Advance Notification Form, Additional Information Form, and full technical report with costing analysis – all submitted through the company's Corporation Tax return. Everything seemed to be proceeding smoothly.
The Compliance Check Arrives
Then came the surprise: HMRC sent a letter announcing they wanted to conduct a compliance check on the 2023 claim. For anyone unfamiliar with the process, this can sound alarming. But compliance checks are actually quite common for first-time claimants; HMRC simply wants to verify the legitimacy of the claim.
HMRC's Compliance Team was satisfied with the R&D technical details but requested additional evidence of the actual work performed, including timelines and contemporaneous documentation. This is where having proper support becomes invaluable.
Compliance checks are nothing to fear; in most cases, they are an administrative hurdle that rarely evolve into a full audit.
Support When It Matters Most
The Tax Cloud team immediately addressed HMRC's questions, gathering additional evidence of the work, proof of costs, and timesheet examples. They guided XL Industries through collecting the right documentation, then compiled everything into a comprehensive response to HMRC.
For Troadec, this support was unexpected but deeply appreciated. He admitted he hadn't anticipated this level of backing, particularly when dealing with a government enquiry. The reassurance of having experienced professionals handle the HMRC correspondence made all the difference.
HMRC reviewed the additional evidence and was convinced the claim was valid. XL Industries received their closure notice, confirming the claim had been accepted. More importantly, they received the tax credit they were entitled to for their innovative work.
Key Takeaways for Other Businesses
The XL Industries experience offers several important lessons for companies considering R&D tax credits:
- Choose the right approach for your needs. A more expensive service isn't always better, and the right solution will depend on your project size and internal capabilities.
- Documentation is crucial. Having contemporaneous records of your R&D work, including timelines and evidence of costs, makes the process much smoother.
- Compliance checks aren't rejections. HMRC often reviews first-time claims as standard practice. Compliance checks are sometimes just a verification process.
- Professional support matters. When HMRC comes knocking, having experts who stand behind your claim and can respond effectively is invaluable.
- Transparency pays off. Clear, honest communication with both your tax adviser and HMRC leads to better outcomes.
As Troadec concluded, the value extended far beyond straightforward fees with no hidden costs: "I didn't think you would take responsibility for answering to HMRC which reassured me a lot".
For innovative manufacturers and other companies developing new technologies or processes, R&D tax credits represent a significant opportunity to recoup some of the costs of innovation. But as XL Industries learned, the key to success is often having the right support system in place when questions come up.
Their experience proves that with proper preparation, clear documentation, and expert support, even an HMRC compliance check can become just another step in a successful R&D tax credit journey. Get in touch with the Tax Cloud team to see how we can support your claim.
