HMRC is asking businesses to come forward about excessive R&D tax claims

HM Revenue & Customs (HMRC) has launched a new disclosure service for companies that have wrongfully received research and development (R&D) tax relief and failed to amend their returns.

The move underscores the government’s crackdown on abuse of the scheme, which is reported to have cost the exchequer more than £1 billion in lost revenue.

This system targets firms that are likely to overspend their R&D budget honestly, rather than those that are deliberately fraudulent. It follows an increase in HMRC investigations into questionable R&D claims, with tax under review reaching £641 million this year, according to the department’s annual report.

By being generous with design, R&D tax credits encourage companies to invest in new projects. However, this same generosity has also attracted fraud and organized criminal efforts to be misused, costing the Treasury around £1 in every £4 of aid in 2020-21.

Dawn Register, tax dispute resolution partner at BDO, said: “There are other disclosure routes available to companies looking to update their tax affairs. We have seen many dishonest ‘claims’ agents in the R&D market in recent years. If a company now realizes that its past claims were ‘speculation’, voluntary disclosure is the best course of action.”