HMRC sends ‘nudge’ letters to 2,000 companies over R&D tax fraud

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

HMRC sends ‘nudge’ letters to 2,000 companies over R&D tax fraud

HM Treasury-UK budget.jpg

The action is part of a crackdown on inaccurate and fraudulent R&D tax claims, which cost the government £469 million last year.

The UK revenue service has sent letters to 2,000 businesses in response to fraudulent and mistaken claims to the research and development tax relief schemes, it has emerged.

In letters sent in January, HM Revenue and Customs (HMRC) warned companies that they may face formal tax enquiries and rejected claims if their returns are found to be inaccurate for whatever reason.

Taxpayers should check their relief claims, identify any inaccuracies and make amendments as soon as possible, according to the revenue service.

The HMRC letters told companies: “We’ve seen an increase in fraudulent claims for R&D tax relief. We also believe companies in your sector are being deliberately targeted by third parties to make inaccurate R&D claims as an amendment to their company tax returns.

“As company director, it’s important you submit accurate claims for the correct amount of tax relief,” the letters added. “If we check a claim and find it’s incorrect, your company might be asked to pay back the full amount.”

Carrie Rutland, partner at advisory firm BDO’s innovations and technology team in the UK, said she expects HMRC to keep issuing these nudge letters and that the window of opportunity to address past claims could be closing.

“It’s important for all businesses to review their past R&D claims to make sure there are no potential skeletons in the company closet,” said Rutland.

“It’s always better to make a voluntary disclosure for errors before you are nudged by HMRC, as this should be treated as an ‘unprompted’ disclosure which carries a much lower penalty – if any,” she added.

In its annual report from December 2022, HMRC estimated that £469 million ($570 million) was lost through fraud and error in its two R&D schemes in tax year 2021-22. This was the equivalent of 4.9% of corporate tax R&D relief.

The UK government has responded by increasing resources for HMRC to boost compliance. For example, the revenue service has doubled the size of its specialist R&D team focused on compliance among SMEs.

HMRC sent out the ‘nudge’ letters on the weeks of January 23 and January 30 with the aim of raising awareness of the problem.

The UK government is holding a consultation on merging the R&D tax relief schemes into one simplified programme. Businesses have until March 13 to comment.

more across site & shared bottom lb ros

More from across our site

Katie Leah’s arrival marks a significant step in Skadden’s ambition to build a specialised, 10-partner London tax team by 2030, the firm’s European tax head tells ITR
Increasingly, clients are looking for different advisers to the established players, Ryan’s president for European and Asia Pacific operations tells ITR
Using tax to enhance its standing as a funds location is behind Luxembourg’s measures aimed at clarifying ATAD 2 and making its carried interest regime more attractive
Encompassing everything from international scandals to seismic political events, it’s a privilege to cover the intriguing world of tax
In his newly created role, current SSA commissioner Bisignano will oversee all day-to-day IRS operations; in other news, Ryan has made its second acquisition in two weeks
In the age of borderless commerce, money flows faster than regulation. While digital platforms cross oceans in milliseconds, tax authorities often lag. Indonesia has decided it can wait no longer
The tariffs are disrupting global supply chains and creating a lot of uncertainty, tax expert Miguel Medeiros told ITR’s European Transfer Pricing Forum
Corporate counsel should combine deep technical knowledge with strategic dynamism, says Agarwal, winner of ITR’s EMEA In-house Indirect Tax Leader of the Year award
Luxembourg’s reform agenda continues at pace in 2025, with targeted measures for start-ups and alternative investment funds
Veteran Elizabeth Arrendale will lead the new advisory practice, which will support clients with M&A tax structuring, post-deal integration, and more
Gift this article