The UK experience with R&D claim quality

1Summary

The United Kingdom offers Corporation Tax relief for research and development. Over the five years to 2026 it changed the way that relief is claimed, checked and paid. The changes followed HMRC's own measurement of non-compliance: its random enquiry programme found that around half of claims by small and medium-sized enterprises (SMEs) for 2021 to 2022 were non-compliant in part or in full, and it estimated error and fraud across the reliefs at £1.3 billion, or 17.6 percent of £7.6 billion claimed.1

The measures included a cap linked to PAYE, advance notification of claims, an additional information form, digital claims, an end to paying R&D tax credits to agents, and, from April 2024, a merged scheme.12 HMRC also increased its compliance staff and checks.1

Since then claim numbers have fallen and HMRC's estimates of error and fraud have come down. Its revised estimate for 2023 to 2024 is 6.4 percent, and its illustrative estimates for the two following years are 5.3 percent.3 The Comptroller and Auditor General has continued to qualify his audit opinion on HMRC's accounts because of the level of error and fraud in the reliefs.4

This paper sets out the measures, the evidence HMRC has published on their effect, what that evidence says about agents, and what it does not cover. It describes the UK rules and record only, and makes no recommendation for the United Kingdom.

2The problem as HMRC measured it

2.1Random enquiries

Before HMRC introduced its Mandatory Random Enquiry Programme (MREP), it described its understanding of non-compliance in R&D tax credits as "incomplete".1 The programme examines a representative sample of SME claims in detail. The first, covering 2020 to 2021, was published in July 2023, and the second, covering 2021 to 2022, in July 2024.1

The second programme found that:1

around half of SME claims were non-compliant in part or in full, and 30 percent of claims were wholly non-compliant, meaning no qualifying R&D activity took place;
in 21 percent of cases some R&D took place, but more relief was claimed than was due;
fraud indicators were present in fewer than 10 percent of cases examined, which HMRC said "indicates that most non-compliance is due to other behaviours";
claims with expenditure over £1 million were fully compliant in 75 percent of cases, compared with between 29 and 58 percent for smaller claims; and
64 percent of the value of first time claims was non-compliant, and 46 percent of first time claims were wholly non-compliant.

2.2Error and fraud estimates

HMRC's estimates, as published in October 2024, put error and fraud across the reliefs at 16.7 percent in 2020 to 2021 and 17.6 percent in 2021 to 2022. For the SME scheme the figures were 24.4 and 25.8 percent.1

Year	Overall	SME scheme	Basis
2020 to 2021	16.7%	24.4%	Final estimate based on random enquiries
2021 to 2022	17.6%	25.8%	Final estimate based on random enquiries

Figure 1. HMRC estimates of error and fraud in the R&D reliefs, as published in October 2024.1 Later revisions are discussed below.

The Comptroller and Auditor General qualified his opinion on the regularity of HMRC's accounts because of the material level of error and fraud in the R&D reliefs.45

3What changed

HMRC lists the policy changes it made to address error and fraud as follows.1

Measure	Applies from
Cap linked to PAYE on the size of SME claims	Accounting periods from April 2021
Advance notification of claims	Accounting periods from April 2023
Notifying HMRC of a named company officer responsible for the claim and of any advisers used in compiling it	Claims from August 2023
Claiming digitally and providing additional information	Claims from August 2023
Ending nominations of R&D tax credit payments, and new assignments	Claims from April 2024; assignments from November 2023

Figure 2. Policy changes listed by HMRC.1

3.1Claim notification

For accounting periods beginning on or after 1 April 2023, a company must submit a claim notification form if it is claiming for the first time, or if its last claim was made more than three years before the last date of its claim notification period.6 The period ends six months after the end of the period of account. If a required notification is not made in time, the claim is invalid.6 The statutory basis is in the Corporation Tax Act 2009, sections 1042C, 1045A and 1142A, and the content of the notification is set out in Schedule 1 to SI 2023/813.7

HMRC's guidance asks for the contact details of all agents involved in the claim, "including any agent who has given advice, analysed costs, helped prepare technical assessments, given information for or completed the online forms or Company Tax Return".6

3.2The additional information form

For claims made on or after 8 August 2023, a company must provide the information specified in Schedule 2 to SI 2023/813 on or before the date of the claim, under powers in paragraph 83EA of Schedule 18 to the Finance Act 1998. If it does not, the claim is invalid.8 The form asks for the company's details, the senior officer responsible for the claim, every agent involved, qualifying expenditure by category, and a description of the main projects: the advance sought, the uncertainties faced and how the company sought to overcome them.89 A company claiming for 4 to 10 projects must describe at least 3, together accounting for at least half of the qualifying expenditure claimed.9

HMRC's manual says it is not acceptable to refer to documents held outside the form, for example "see R&D report", and that incomplete or improper responses "increase the likelihood of a return being subject to enquiry or other compliance activity".8 HMRC says that before the change around half of claimants did not provide any extra information alongside their claim.1

3.3Payment to the company

For claims made on or after 1 April 2024, HMRC will generally pay R&D tax credits only to the claimant company, which must give its own payment details on its Company Tax Return. The exceptions are a connected nominee and exceptional circumstances.10 New assignments of R&D tax credit payments made on or after 22 November 2023 are void, subject to a transitional exception.10 HMRC said this would help reduce non-compliance "by reducing the financial incentive for agents to overstate claims", and that more than 90 percent of claims that are fraudulent or display some markers of fraud use nominee bank accounts.1

3.4The merged scheme

For accounting periods beginning on or after 1 April 2024, the merged R&D expenditure credit (RDEC) and enhanced R&D intensive support (ERIS) replace the earlier RDEC and SME schemes.2 The merged RDEC is a taxable credit at 20 percent.2 ERIS is for loss-making SMEs whose relevant R&D expenditure is at least 30 percent of their total expenditure; it gives an extra deduction of 86 percent of qualifying costs and a payable credit worth up to 14.5 percent of the surrenderable loss.2 Under both schemes the credit for a period cannot exceed a cap of £20,000 plus 300 percent of the company's relevant PAYE and National Insurance liabilities, unless the company is exempt.2

HMRC's statistics record that, for expenditure from 1 April 2023, the RDEC rate had already risen to 20 percent and the SME scheme's enhancement and payable credit had fallen to 86 percent and 10 percent, with 14.5 percent for R&D intensive SMEs.11

3.5Compliance resources

HMRC reported that it had more than 500 people working on R&D compliance in 2024, compared with around 100 in 2020 to 2021.1 In 2023 to 2024 it opened compliance checks on 9,700 claims, 17 percent of claims received, and recovered £441 million through those checks. Of checks completed that year, 77 percent required an adjustment.1

HMRC describes its approach as preventing error and fraud from entering the system, promoting compliance and responding to non-compliance where it happens.1 It risk assesses each claim on receipt, using the additional information form, and says the new information means it can more accurately identify claims that may not be compliant while reducing the risk that valid claims are picked up for a check.1 Where it sees similar mistakes made by many claimants, it contacts them at volume and asks them to correct their claims before opening a check.1

HMRC generally has 12 months from the date a claim is submitted to open a compliance check, and can make a discovery assessment later in some circumstances.1 Where an inaccuracy is found, HMRC says it is legally required to consider whether an inaccuracy penalty is appropriate, and that it applies penalties where the error results from a lack of reasonable care or deliberate behavior.1 It aims to identify the need for a check before payment where it can, but opens some checks after payment, which it acknowledges can leave customers uncertain whether their claim will later be recovered.1

Measure of HMRC's compliance work	2022 to 2023	2023 to 2024
Claims received	90,000	61,000
Claims processed within 40 days	75%	92%
Compliance checks	8,300	9,700
Coverage	10%	17%
Tax recovered from checks	£288 million	£441 million
Average time to complete a check	269 days	246 days
Checks requiring an adjustment	71%	77%

Figure 3. HMRC compliance activity on R&D claims, excluding cases dealt with by Large Business teams; figures rounded by HMRC.1

The disputes that followed were mostly settled by agreement. HMRC reported that 89 percent of compliance checks settled were resolved by agreement with the claimant.1 In 2023 to 2024 it held 822 requests for a statutory review of an R&D decision; of the 251 concluded, the decision was upheld in 214 cases, varied in 33 and cancelled in fewer than 5. One R&D case reached a tribunal hearing that year, and it was decided in HMRC's favor.1 HMRC also reported that complaints about its R&D compliance work rose from 212 to 423 between the two years, and that around half of complaint outcomes were upheld in 2023 to 2024.1

3.6Measures aimed at agents

HMRC states that more than 90 percent of R&D claimants have an authorized agent acting for them.1 Alongside the notification and information requirements, it has:

set up an R&D Professional Bodies mailbox for professional bodies to raise R&D matters and breaches of standards;1
assigned an Agent Relationship Manager to agents identified as submitting multiple claims with similar risks, under an Agent Educational Model launched in January 2024;1
worked with the Advertising Standards Authority to remove false advertising by agents claiming to be HMRC approved;1
opened a route, in September 2025, for agents and accountancy professionals to report another agent suspected of poor R&D service standards;12
required anyone paid to interact with HMRC about someone else's tax affairs, including by sending claims, to register for an agent services account;13 and
since 1 April 2026, been able to charge penalties on tax advisers for sanctionable conduct, meaning conduct intended to bring about a loss of tax revenue, with a maximum of 70 percent of the potential lost revenue for a first penalty and a minimum of £7,500.14

4What the record shows since

4.1Fewer claims

HMRC reported that claims fell from 83,240 for 2021 to 2022 to 65,690 for 2022 to 2023, with SME claims down by around 23 percent.1 Its September 2026 statistics estimate 40,325 claims for 2024 to 2025, a decrease of 17 percent from the previous year, and say "a key driver of the decrease is believed to be the continuing impact of the additional information form".11 The number of first time SME claimants for 2023 to 2024 was 3,405, a decrease of 53 percent on the previous year.11

The value of relief has not fallen in the same way. The provisional estimate of total relief claimed for 2024 to 2025 is £8.2 billion, 5 percent more than the previous year, and the average claim value rose by 27 percent.11 HMRC's analysis of the earlier fall found that the largest reduction in value was in claims with expenditure below £20,000, and that the sectors with the greatest fall included arts, entertainment and recreation and hospitality, "sectors that HMRC typically would not expect to see large volumes or values of R&D claims".1

The 2026 statistics show relief concentrated in larger claims. The number of claims over £2 million rose by 14 percent in 2024 to 2025 and their value by 21 percent; 6 percent of claims accounted for 69 percent of the total value claimed; and the information and communication, manufacturing, and professional, scientific and technical sectors made up 75 percent of claims.11

4.2Lower estimates of error and fraud

HMRC's 2025 to 2026 annual report revised its estimate for 2023 to 2024, using its third random enquiry programme and a new method for large business claims, to 6.4 percent (£493 million) overall, 11.1 percent for the SME scheme and 3.2 percent for RDEC.3 It said the overall rate was lower than estimates since 2020 to 2021, "reflecting legislative and operational changes to tackle error and fraud, notably the mandation of digital claims and additional information requirements introduced in 2023".3 Its illustrative estimates for 2024 to 2025 and 2025 to 2026 are 5.3 percent overall, with 11.0 percent for the SME scheme and ERIS.3

Year	Overall	SME scheme and ERIS	Basis
2023 to 2024	6.4% (£493m)	11.1%	Revised estimate based on random enquiries
2024 to 2025	5.3% (£442m)	11.0%	Illustrative
2025 to 2026	5.3% (£475m)	11.0%	Illustrative

Figure 4. HMRC estimates of error and fraud, as published in July 2026.3 HMRC notes that figures are not directly comparable across the scheme changes.

The Comptroller and Auditor General again qualified his opinion on the regularity of HMRC's 2025 to 2026 accounts because of the level of error and fraud in the reliefs. He reported that the estimated rate "has nearly halved since 2022-23", and that HMRC's central estimate of 11.1 percent for the SME scheme in 2023 to 2024 "remains amongst the highest reported across all government spending programmes".4 He also noted that HMRC "will not know the full impact of these changes until it has completed a sample of enquiries on 2025-26 returns".4

5Agents and claim quality in HMRC's data

HMRC's published data say something about agents, though not about how they are paid.

In its second random enquiry programme, around half of companies used a specialist R&D agent. HMRC said that "overall, non-compliance (as a value of claims) was slightly higher in those claims that were submitted with the support of a specialist R&D agent". Its tables show non-compliance of 28 percent of the value of claims made with an R&D agent, against 21 percent for claims without one.1 HMRC also reported earlier analysis showing that taxpayers using agents affiliated to a professional body had a similar percentage of non-compliant cases to other groups, but lower levels of non-compliance by value.1

HMRC has described the risk it sees in some agent practices. In July 2023 it wrote to around 7,500 care home companies, telling them among other things what to do if approached by an agent "who offers to submit a speculative claim in return for high commission".1 It set out an illustrative case in which an agent persuades a small restaurant to claim, takes £1,600 in fees from relief of £4,000, and the business later has to repay the whole £4,000 with interest.1 HMRC presented this as an illustration, not as a measured case.

HMRC describes agents as playing "a vital role" in the reliefs, and says that "there are some agents who provide poor or incorrect advice to customers".1 Its data on agents do not distinguish between fee arrangements, and nothing in them shows how any agent was paid.1

6What the measures do not do

The changes address who claims, what a claim must contain, who is named on it and where the money goes. They do not address the basis of the agent's fee.

No fee field. Neither the claim notification nor the additional information form asks how an agent is paid, how much, or whether the fee depends on the claim.689
No statutory fee rule. No provision of UK tax legislation capping or prohibiting contingent fees for R&D claims was identified for this paper.
No regulation of agents as such. HMRC states that it "does not regulate tax agents including those who advise on R&D claims".1 Its standard for agents expects terms of engagement to explain how the agent is to be paid and what deductions it will make from any repayment, but the standard does not replace anything in law.15
Professional rules bind members only. The Professional Rules and Practice Guidelines of the Chartered Institute of Taxation and the Association of Taxation Technicians say contingent fees "can carry increased risks" and that members using them should ensure their conduct meets, and is seen to meet, the principles of integrity and objectivity.16 Those rules bind members of the two bodies, not every agent.
The company remains responsible. HMRC states that even if a customer uses a tax agent, "they remain responsible for their own tax affairs".1

The restriction on nominations is the one measure that HMRC linked to the agent's financial incentive, and it works by changing who receives the payment rather than how the fee is set.110

7The limits of the evidence

Several limits apply to the record described above.

Attribution. HMRC and the Comptroller and Auditor General attribute the fall in error and fraud largely to the 2023 changes, but several measures took effect close together, alongside changes in rates and schemes, and HMRC has not published a separate estimate of the effect of each.34
Illustrative estimates. The estimates for 2024 to 2025 and 2025 to 2026 are illustrative and will be replaced when random enquiry results are available.3
Revisions. HMRC's earlier illustrative estimate for 2023 to 2024 was 7.8 percent; the revised figure is 6.4 percent, partly because the expenditure base was revised.13
Comparability. HMRC's statistics state that SME figures for 2024 to 2025 are not comparable with earlier years because of the merged scheme.11
Fees. No HMRC publication found for this paper reports how R&D agents are paid or compares claim quality by fee arrangement. HMRC's tables on agents distinguish claims made with and without a specialist R&D agent, not the basis of the agent's fee.1

8What the facts show

The UK record shows a sequence: measurement first, through random enquiries; then changes to the claim process that require more information, name the people responsible and route payment to the company; then a fall in claim numbers and in estimated error and fraud. HMRC and the National Audit Office both connect the fall to the information requirements introduced in 2023.34 The SME rate of error and fraud remained, in the Comptroller and Auditor General's words, "amongst the highest reported across all government spending programmes" for 2023 to 2024.4

The record also shows what the UK chose not to collect. It identifies the agents involved in each claim but not their fees, and the one measure HMRC tied to agents' financial incentives operates on the flow of the payment.8101 The UK evidence therefore shows the effect of a package of disclosure, process and payment measures. It does not show the effect of any rule on the basis of agents' fees, because none has been introduced.

References

HM Revenue and Customs, Approach to Research and Development tax reliefs 2023 to 2024 (published 30 October 2024), sections 1.1, 1.2 (Table 1), 2.1 (Table 2), 2.2, 2.3, 2.4 (Table 4) and 2.5, and Annex B, Themes 1, 2, 4 and 5 and Tables B.4 and B.5. https://www.gov.uk/government/publications/hmrcs-approach-to-research-and-development-tax-reliefs-2023-to-2024/approach-to-research-and-development-tax-reliefs-2023-to-2024 (accessed 11 October 2026). Back
HM Revenue and Customs, Research and Development (R&D) tax relief: the merged R&D expenditure credit scheme and enhanced R&D intensive support (last updated 8 January 2026), sections "If your credit exceeds the PAYE cap", "The merged R&D expenditure credit" and "Enhanced R&D intensive support". https://www.gov.uk/guidance/research-and-development-rd-tax-relief-the-merged-scheme-and-enhanced-rd-intensive-support (accessed 11 October 2026). Back
HM Revenue and Customs, Annual Report and Accounts 2025 to 2026 (HC, July 2026), "Our accountability", Control challenges, "Corporation Tax research and development tax relief error and fraud" (page 107), and Resource Accounts, note 3.1.4, "Corporation tax reliefs: R&D error and fraud" (pages 251 to 252). https://assets.publishing.service.gov.uk/media/6a4f66c406e7256c331df8a2/HMRC_annual_report_and_accounts_2025_to_2026.pdf (accessed 11 October 2026). Back
National Audit Office, Report by the Comptroller and Auditor General on HM Revenue and Customs 2025-26 Accounts, published within HMRC's Annual Report and Accounts 2025 to 2026, Summary paragraph 11 and paragraphs 2.7 and 2.8. https://assets.publishing.service.gov.uk/media/6a4f66c406e7256c331df8a2/HMRC_annual_report_and_accounts_2025_to_2026.pdf (accessed 11 October 2026). Back
National Audit Office, Report by the Comptroller and Auditor General: HM Revenue & Customs 2023-24 Accounts, paragraph 2.9. https://assets.publishing.service.gov.uk/media/6889f286048fff613a4d5b72/Report_by_the_Comptroller_and_Auditor_General.pdf (accessed 11 October 2026). Back
HM Revenue and Customs, Tell HMRC you want to claim Research and Development (R&D) tax relief (last updated 31 October 2024), sections "Who needs to submit the form", "When to submit the form" and "What information you'll need". https://www.gov.uk/guidance/tell-hmrc-that-youre-planning-to-claim-research-and-development-rd-tax-relief (accessed 11 October 2026). Back
HM Revenue and Customs, Corporate Intangibles Research and Development Manual, CIRD183000, "R&D Tax Reliefs: reformed reliefs: claims process: pre-notification of claims", sections "Statutory framework", "Claim notification period" and "Information to be provided". https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird183000 (accessed 11 October 2026). Back
HM Revenue and Customs, Corporate Intangibles Research and Development Manual, CIRD182000, "R&D Tax Reliefs: reformed reliefs: claims process: additional information form", sections "Statutory framework", "What information is required" and "Failure to provide complete or proper responses". https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird182000 (accessed 11 October 2026). Back
HM Revenue and Customs, Additional information you must submit before you claim Research and Development tax relief (last updated 26 September 2025), sections "Who can submit", "Company details to include" and "Project details to include". https://www.gov.uk/guidance/submit-detailed-information-before-you-claim-research-and-development-rd-tax-relief (accessed 11 October 2026). Back
HM Revenue and Customs, Corporate Intangibles Research and Development Manual, CIRD81805, "R&D tax relief: conditions to be satisfied: restriction of nominations and assignments" (updated 25 August 2026), sections "Restriction of nominations (CTA09/S1142D)" and "Restriction of assignments (CTA09/S1142C)". https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird81805 (accessed 11 October 2026). Back
HM Revenue and Customs, Research and Development Tax Credits Statistics: September 2026 (accredited official statistics, updated 29 September 2026), sections 1, 3, 4, 5, 10 and 11. https://www.gov.uk/government/statistics/corporate-tax-research-and-development-tax-credit/research-and-development-tax-credits-statistics-september-2026 (accessed 11 October 2026). Back
HM Revenue and Customs, Reporting poor R&D tax relief service standards (published 26 September 2025). https://www.gov.uk/guidance/reporting-poor-rd-tax-relief-service-standards (accessed 11 October 2026). Back
HM Revenue and Customs, Check if and when you need to register as a tax adviser with HMRC (last updated 3 September 2026), section "Who needs to register". https://www.gov.uk/guidance/check-if-and-when-you-need-to-register-as-a-tax-adviser-with-hmrc (accessed 11 October 2026). Back
HM Revenue and Customs, Compliance Handbook, CH176100, "Sanctionable conduct by tax advisers: Overview", and CH176140, "Commencement date". https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch176100 (accessed 11 October 2026). Back
HM Revenue and Customs, The HMRC standard for agents (updated 9 February 2026), introduction and section 4.3.3. https://www.gov.uk/government/publications/hmrc-the-standard-for-agents/the-hmrc-standard-for-agents (accessed 11 October 2026). Back
Chartered Institute of Taxation and Association of Taxation Technicians, Professional Rules and Practice Guidelines (effective 9 November 2018, updated 1 January 2021), paragraphs 8.2.1 to 8.2.3. https://www.att.org.uk/sites/default/files/PRPG%20%28Update%201.1.2021%29%20-%20Final.pdf (accessed 11 October 2026). Back

Cite this paper

Summary

1Summary

2The problem as HMRC measured it

2.1Random enquiries

2.2Error and fraud estimates

3What changed

3.1Claim notification

3.2The additional information form

3.3Payment to the company

3.4The merged scheme

3.5Compliance resources

3.6Measures aimed at agents

4What the record shows since

4.1Fewer claims

4.2Lower estimates of error and fraud

5Agents and claim quality in HMRC's data

6What the measures do not do

7The limits of the evidence

8What the facts show

References

About this paper

Cite this paper

Summary

1Summary

2The problem as HMRC measured it

2.1Random enquiries

2.2Error and fraud estimates

3What changed

3.1Claim notification

3.2The additional information form

3.3Payment to the company

3.4The merged scheme

3.5Compliance resources

3.6Measures aimed at agents

4What the record shows since

4.1Fewer claims

4.2Lower estimates of error and fraud

5Agents and claim quality in HMRC's data

6What the measures do not do

7The limits of the evidence

8What the facts show

References

About this paper

Related papers