The UK tax authority has launched a voluntary disclosure service for firms that have overclaimed research and development (R&D) credits in an effort to cut the billions of pounds lost to faulty claims. 

With the new service, companies that have claimed too much R&D relief and have not amended their tax returns can submit an online form to HMRC, informing it of the amount owed. 

The disclosure system is not for companies that deliberately overclaimed tax credits or who claimed them while knowing the relevant activities did not qualify for relief. 

The R&D tax credit system allows firms developing new technologies to claim relief from HMRC, encouraging businesses to make vital advancements. According to government figures, more than 65,000 R&D tax credit claims were made for the tax year 2022 to 2023.  

R&D tax credits are seen as vital to the tech industry, however, HMRC has warned that false claims have become a major concern. In August, it was revealed in HMRC’s accounts that £4.1bn has been lost through the scheme since 2020.  

A spokesperson for HMRC said the “levels of non-compliance” are “clearly unacceptable and the public rightly expect us to take action”. 

The Labour government has said repeatedly that tackling tax fraud is key to boosting Treasury funds. 

Under the previous government, former chancellor Jeremy Hunt reformed the R&D tax system, decreasing the deduction rate for SME credits from 130% to 86% for profitable SMEs and from 14.5% to 10% for lossmaking firms, hoping to tackle fraudulent claims. 

The policy change was met with a strong backlash from the industry, with tech lobbying group the Startup Coalition describing the move as a “blunt instrument” that was “punishing businesses”. The group’s message to Hunt was supported by executives from companies including Wayve and Thymia. 

In 2023, the majority (59%) of R&D tax credit claims were disputed or rejected, according to a report by EmpowerRD. 

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