HMRC have launched a new Research and Development (R&D) tax disclosure service, enabling voluntary disclosures for any R&D claims made in error that cannot be amended on a Company Tax Return.
R&D claims have attracted the focus of HMRC in recent years due to the perceived increased risk of fraud and substantial volume of errors in claims being submitted. The disclosure service follows a series of new measures to tighten rules around R&D relief and create a more robust approach to investigating claims.
Who can use the service?
The service can be used by directors, company secretaries or tax advisers to make disclosures about a company’s tax affairs if all of the following apply.
- Too much R&D tax relief has been claimed;
- A tax return cannot be amended to correct an R&D claim as the time limit in which to do so has passed; and
- Further Corporation Tax needs to be paid or overpaid tax credits for R&D relief need to be paid back.
Essentially, the scheme should only be used if there are errors within an R&D claim and a company is out of time to amend its Corporation Tax return.
How the disclosure service works
HMRC do not need to be notified before the service is used, disclosures can be made by submitting the online form and uploading the necessary calculations.
Following submission of the disclosure, HMRC will get in touch with a letter of acceptance or to request further information. A payment reference number will be sent, usually within 15 calendar days of the disclosure being made.
The service requires specific information to be provided, including the Unique Taxpayer Reference, Standard Industrial Classification, the name of the company’s HMRC compliance manager (if they have one) and the name of the agent that prepared the original claim (if known).
Additional information required includes the accounting periods the disclosure relates to and the reasons for the inaccuracy.
Making a disclosure
The offer a company makes to HMRC will usually be for the full amount it owes, including any Corporation Tax that has not been paid, SME tax credits or R&D expenditure credits to repay and penalties and interest due.
The scheme does not actively incentivise regarding the waiver of penalties or protection from criminal prosecution – its motivation is to enable companies to voluntarily clear up historical inaccuracies and ensure their tax affairs are up to date.
Penalty amounts will vary depending on the company’s circumstances – they will usually be lower if a voluntary disclosure has been made.
Any tax that is owed to HMRC will be considered a late payment, so interest will be due.
HMRC usually requests that the amount owed is paid in full within 12 months. The service can also be used to request more time to pay the full amount.
How M+A Partners can help
R&D calculations can be complex, and professional advice ensures Corporation Tax and R&D tax relief computations are accurately prepared for any disclosure. There are several routes that can be used to make a disclosure and it is important to ensure the right one is used for your specific circumstances.
Updated R&D guidance is due to be published by HMRC in February 2025 and will be communicated when available.
Should you have any queries on R&D tax credits or making a disclosure, please get in touch with your usual M+A Partners contact or email enquiries@mapartners.co.uk.