New HMRC R&D Disclosure Service launched December 2024

The launch of the new HMRC R&D Disclosure Service enables companies that think they have claimed too much R&D tax relief in prior periods to declare this and correct their claim to a maximum of 6 years back. This only applies to claims that are out of time to submit an amended tax return, so between 2 and 6 years ago. Currently, these would be accounting periods ending before December 2022. Periods ending after this companies can still adjust their Corporation Tax return through the CT600/Tax Computation.  

This service is part of HMRC’s broader effort to address errors and potential fraud in R&D tax relief claims, which have been estimated to cost the Exchequer over £1 billion in lost revenues. With increased scrutiny on R&D claims and a growing number of HMRC enquiries, businesses should be proactive in reviewing past claims to ensure compliance.

The new R&D voluntary disclosure service provides a structured way for companies to correct errors without the risks associated with HMRC launching a formal investigation. By voluntarily correcting errors, businesses can demonstrate transparency and reduce the risk of future compliance checks or penalties.
 
If you think you have claimed too much R&D tax relief through carelessness or have a reasonable excuse, I would first recommend getting some advice from a professional R&D tax advisor.

Reasons why a claim could be overstated:

–  Previous tax advisor provided incorrect advice. Was it really R&D? 
–  Claimed SME scheme for grant-funded or subsidised projects. 
–  Ineligible costs used in the claim (IP costs, marketing, overhead, etc). 
–  Overinflated the claim with 100% or high apportionment of costs. 
–  Misinterpretation of qualifying activities, particularly for software development, process improvements, or prototype costs.
– Incorrect application of subcontractor and externally provided worker rules, leading to inflated claims.
–  Failure to adjust claims after an HMRC compliance check, resulting in continued overclaims across multiple years.

“careless” or “deliberate” errors

If the company deliberately, rather than carelessly, claimed R&D relief then you need to declare this through the Contractual Disclosure Facility, rather than the R&D Disclosure Service.  

It’s important to understand the difference between “careless” and “deliberate” errors. Careless errors occur when a company has made a mistake due to a lack of reasonable care, for example, misunderstanding eligibility criteria or applying incorrect methodologies. Deliberate errors, on the other hand, involve knowingly submitting false or inflated claims. HMRC treats deliberate cases much more seriously, often leading to higher penalties and, in extreme cases, criminal investigations.
 
On either service penalties may be due, depending on the circumstances, plus interest on the overpaid tax relief. So why declare? If an unprompted declaration is made through the disclosure service, this can reduce penalty levels for a voluntary disclosure.   

Voluntary disclosure can significantly mitigate penalties, with reductions based on the level of cooperation provided, and the quality of the disclosure. In contrast, if HMRC identifies an issue first, businesses could face penalties of up to 100% of the overclaimed relief (or even more in cases of deliberate concealment).

What happens after you submit a disclosure?  

HMRC aims to respond within 30 days of submission, either accepting the disclosure, requesting further information, or rejecting the offer. If accepted, payment of any liability is expected within 30 days. Companies that are still within the amendment window (12 months after the filing deadline) should correct errors through their Corporation Tax return instead of using the disclosure service.
 
If you are not sure whether you need to submit a disclosure and want further advice regarding your R&D activity, then please get in touch with our specialist team today via the form below or book an appointment. 

Tell HMRC if you’ve claimed too much Research and Development (R&D) tax relief – GOV.UK