HM Revenue and Customs’ (HMRC) new specialist research and development (R&D) disclosure facility provides a structured process for businesses to correct their tax filings and repay any overpaid credits or additional corporate tax due.
Steven Porter and Sophie Warren, tax law experts at Pinsent Masons, were commenting following the introduction of R&D facility on 31 December 2024. The service is designed for companies that have claimed excessive R&D tax relief - reducing their tax bill or receiving cash payment based on R&D expenditure - and need to rectify their corporation tax beyond the standard correction period of 12 months from the filing deadline.
This facility is specifically for cases involving careless errors or mistakes made despite taking reasonable care, and not for deliberate overclaims. Companies that have overstated losses without additional corporation tax due cannot use this facility but are encouraged to contact HMRC to explain their situation.
Porter said: “Incorrect R&D claims have been under increasing scrutiny over the last few years, with the government making numerous changes to the law to try to prevent inappropriate claims and stamp out abuse. Many businesses who have made careless errors may have been misled by so-called R&D specialists who encouraged them to make claims that were never really viable. Taxpayers in this position should think carefully about both the possibility of correcting their past errors using this facility and considering whether poor historical advice has contributed to that error.”
To use the facility, companies must calculate the additional tax or credits to be repaid, including interest and penalties. They must then prepare revised corporation tax computations and submit them with the disclosure.
Upon making a disclosure, the company effectively offers HMRC a contract settlement. HMRC has committed to responding within 15 days with a payment reference number so that payment can be made, and within 30 days to the disclosure itself, either accepting the offer, requesting more information, or rejecting it.
Porter said: “The R&D rules can be very complex, and this disclosure facility requires taxpayers to make a number of complex calculations, particularly if dealing with more than one accounting period. As HMRC comments in its guidance, taxpayers would therefore be well advised to obtain professional support to complete a disclosure under this service.”
Making a disclosure under the R&D disclosure facility does not mean that HMRC is prevented from opening a criminal investigation or other enquiries into the company tax return.
Warren said: “While there may be fewer advantages in this disclosure facility than in some previous and existing facilities, it is still a valuable opportunity for taxpayers who realise that they may have made an error to put it right voluntarily. Where a disclosure is made of a taxpayer’s own volition, any penalties will be treated as ‘unprompted’ by HMRC and will therefore be lower. Likewise, voluntary payment of the tax will stop interest from running, which, with interest rates running much higher than in the last few years, can be a considerable amount.”
Contact an adviser
