Have You Overclaimed R&D Relief? What You Need to Know and How to Correct It
Research & Development (R&D) tax relief has been a valuable incentive for businesses investing in innovation. However, over recent years, HMRC has significantly tightened its scrutiny of R&D claims, leading to stricter compliance requirements.
If your business has claimed R&D tax relief, it’s critical to review your claims now—as inadvertent errors could lead to penalties or even criminal investigations if HMRC identifies them first.
Why is HMRC Cracking Down on R&D Claims?
For many years, HMRC processed R&D claims with a light touch, allowing businesses to claim relief with minimal checks. However, due to widespread overclaiming and potential abuse, HMRC has:
- Introduced new reporting requirements for first-time or lapsed claimants.
- Launched a disclosure facility for businesses that may have overclaimed R&D relief in previous years.
- Significantly increased its enforcement actions, including penalties and potential criminal investigations.
Key Changes to the R&D Regime
Shift to the RDEC Regime
Most businesses now claim under the Research and Development Expenditure Credit (RDEC) scheme, although some still qualify for the R&D-intensive scheme if their R&D spend is at least 30% of their total tax-deductible expenses.
New Advance Notification Requirement
Who is affected?
- New claimants
- Companies that haven’t claimed R&D relief in the past three years
What’s required?
These companies must notify HMRC of their intention to claim R&D relief within six months of the end of the relevant accounting period.
Miss the deadline? Your claim will be automatically rejected, even if you meet all other criteria.
Shorter Time Limit to Amend Claims
The standard time limit to file an R&D claim remains two years from the end of the accounting period.
However, if an error has been made, the company only has 12 months from the filing deadline to amend the return.
What if Your Business Has Overclaimed R&D Relief?
HMRC acknowledges that many businesses may have unintentionally overclaimed R&D relief. To address this, it has introduced a new online disclosure facility.
How to Correct an Overclaimed R&D Relief
Determine If You Need to Make a Disclosure
You should consider disclosure if:
The time limit for amending your tax return (12 months from the filing deadline) has expired.
Your company owes corporation tax or must repay overclaimed R&D tax credits.
The incorrect claim was not made deliberately.
Submit an Online Disclosure Form
The form requires:
- Corrected R&D figures
- Supporting computations
- A “Letter of Offer” outlining the amount of tax due, interest, and potential penalties
Receive HMRC’s Response
- HMRC may request more information or accept the disclosure.
- You will receive a payment reference number within 15 days.
Settle the Amount Owed
- If you can’t pay in full, you can request a Time to Pay arrangement—but HMRC usually requires full payment within 12 months.
What Happens If HMRC Contacts You First?
If HMRC identifies an overclaimed R&D relief before you disclose it, your company could face:
Higher penalties
Discovery assessments for underpaid tax
Potential criminal investigation in serious cases
Next Steps: Act Now Before HMRC Does
If you believe your business may have overclaimed R&D relief, it’s far better to voluntarily disclose than to wait for HMRC to act.
Get in touch with Merranti Accounting today—we can:
Review your past R&D claims to check for overclaims
Help you prepare a voluntary disclosure to minimise penalties
Advise on future R&D claims to ensure compliance with the latest rules
Don’t wait for HMRC to investigate—take control now. Contact us today for expert R&D tax relief guidance!
Find more from the spring news letter here
