Article

Changes to R&D claims – what you need to know

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21st January 2025 3 min read

HMRC estimated a total error and fraud rate in Research and Development (R&D) tax relief claims of 17.9% in 2021/22, with approximately 25.8% of fraudulent claims coming from small and medium-sized enterprises (SMEs). To decrease this, HMRC has since updated its approach to enquiries and introduced new compliance processes in 2024 and has committed to open compliance checks on 20% of all R&D claims. Our experts discuss what has changed and explain what this means for you and your business. 

The problems that HMRC has faced with R&D claims 

HMRC has previously identified a significant amount of error and fraud in the R&D claims it received, with the number of fraudulent claims estimated to be worth £1.13 billion in 2020/21 alone. Genuine claimants were facing the same lengthy and costly enquiry processes that fraudulent claimants were experiencing, and while the size of HMRC’s investigative team increased, fraudulent claims were still being uncovered.

HMRC’s new updated approach 

Although some genuine claimants have been subject to enquiries, HMRC’s recent volume compliance approach has been effective. This approach has cut error and fraud rates down to 14.6% for claims from SMEs in 2023/24.  

However, HMRC has changed tactics to single out the error and fraud. It has used a ‘one-to-many’ letter campaign to target claims from specific sectors. It has also used a campaigns team to undertake the bulk of enquiries with a standard letter and template questions. This is a less personal approach and can overlook information previously submitted to support a claim. 

HMRC continues to focus on certain claims from industries that are unlikely to qualify for R&D, with ‘non-technical’ industries being a particular trigger. Claims from those industries will not necessarily be denied, but they are more likely to attract a review from a compliance officer. These can include: 

  • Wholesale and Retail Trade and Repairs 
  • Accommodation and Food 
  • Real Estate 
  • Education 

Similarly, businesses who are reporting R&D costs that are disproportionate to their industry or size face scrutiny too. 

The provisional figures from HMRC show a 23% reduction in claims made by SMEs in the 2022/23. To learn more about the top mistakes that businesses make during compliance checks and how to avoid them, read our article on the increased pressure that HMRC has applied to claims. 

Further measures that have been implemented 

HMRC has established further measures to improve and simplify the process of claiming R&D, including the Additional Information Form (AIF), which is a mandatory part of the R&D tax claim process intended to provide a structured framework for the information needed to support a claim.  

An Agent Educational Model has also been introduced in which HMRC assigns an Agent Relationship Manager to work closely with company agents to help improve their processes and claims.  

With R&D focused webinars and improvements to available guidance, businesses currently can seek assistance from a variety of sources when making claims. 

Submitting R&D claims to HMRC can be complex and challenging. At PKF Smith Cooper, we believe that the best way to ensure you are able to claim the R&D relief you are entitled to is by consulting an R&D specialist for advice.

How can you keep on top of your R&D claims?

Our team of R&D experts can support you and help guide you through the process of making a claim. Get in touch with us today to see what we can do for you and your business.

About the author

Piers Pye-Watson

R&D Tax Manager

I joined PKF Smith Cooper in December 2022. I help companies identify whether they are eligible for R&D tax relief and if so, steer them through the process of claiming.