HMRC’s New R&D Disclosure Service: What You Need to Know

A new disclosure facility has been introduced to help companies address inaccuracies in historic R&D tax relief claims. Who is affected, and how should you use this facility if necessary?

Due to the prevalence of errors and fraudulent claims in R&D tax relief, HMRC has set up a new disclosure facility for overclaimed relief. This facility is specifically intended for situations where amending the relevant tax return is no longer an option, such as when the deadline for amendments has passed.

A key challenge is that affected businesses may be unaware they have overclaimed relief, often because they relied on questionable advice at the time of the claim. In recent years more and more R&D claim agents have been found to be lacking, particularly those offering their services towards sectors unlikely to engage in R&D activities, such as care homes, retailers, childcare providers, pubs, and restaurants. Businesses in these sectors should review past R&D claims and consult a reputable firm if they have any concerns about the validity of their claims.

Ideally the majority of the work required for a claim for R&D tax relief would have been completed by a person within the business; if the claim has been created by an external agent with little input from the business itself this should be considered a major red flag. HMRC imposes higher penalties if it identifies an inaccurate claim independently as opposed to when a taxpayer voluntarily corrects their mistake, advisers should therefore ensure that if any of their clients have made a claim prepared by a third-party firm that these claims are reviewed without delay.

If the requirement to make a disclosure is identified, then companies must submit calculations using an online form. HMRC should respond within 30 days either accepting the revised calculations, rejecting them, and/or requesting additional information.

HMRC’s guidance on making a disclosure can be found here.