HMRC’s Annual Report and Accounts for the period 1 April 2024 to 31 March 2025 was launched in July 2025, weighing in at a hefty 388 pages.
The report outlines HMRC’s performance, financials, strategic objectives and governance for the year ending March 2025.
Key achievements include record tax revenues (£875.8 billion up by 3.9%), improved digital services, enhanced fraud detection using AI (a hot topic in the world of R&D at the moment), and progress in modernising tax administration.
For businesses investing in innovation and utilising the R&D tax relief scheme, the message from HMRC is clear: R&D tax relief is here to stay, but scrutiny is increasing.
For businesses, this means:
- More certainty around long-term support for innovation.
- Faster processing of claims, if they’re well-prepared.
- Higher compliance expectations, especially around documentation and eligibility.
The CP Innovation team has summarised some key points below.
R&D TAX RELIEF: RELIEF EXPENDITURE & PROCESSING
- Despite the increase in enquiry activity and a reduction in the rate of relief, £8.2 billion in total R&D tax relief was claimed in 2024–25, up from £7.7 billion the previous year
- In good news for claimants, 90% of claims were processed within 40 days, exceeding HMRC’s 85% target.
ONGOING GOVERNMENT COMMITMENT
In October 2024, the government published The Corporate Tax Roadmap. It was designed to provide certainty for businesses, show the department’s commitment to maintaining the generosity levels of R&D relief, and committing to improve the administration of the scheme.
Other key developments include:
- Launch of R&D Disclosure Facility – a formal online service designed to help companies voluntarily correct overclaimed R&D tax relief.
- Establishment of R&D Expert Advisory Panel – enhancing HMRC’s administration of R&D tax reliefs by providing sector-specific insights, improving guidance and supporting compliance efforts.
- Consultation on advance clearances to improve scheme administration. In particular, reducing error and fraud, increasing certainty for businesses and improving the customer experience.
ERROR & FRAUD ESTIMATES
According to the statistics, HMRC has made significant progress in reducing error and fraud in R&D claims. However, it should be noted that a significant number of valid claimants were caught in the crossfire of HMRCs enquiry activity and many valid claims were withdrawn, therefore the error and fraud figures quoted below are open to interpretation. According to HMRC
- The estimated error and fraud rate for 2022–23 was 9.9% (£759 million).
- In 2023-24, this reduced to an overall level of 6.5% (£497 million).
- And in 2024-25, it reduced again to an overall level of 5.9% (£481 million).
HMRC’s approach to reducing error and fraud is based on promoting compliance, educating businesses on the conditions for eligibility, and taking action against agents who have sought to abuse the scheme.
OPERATIONAL & SCHEME CHANGES
In August 2023, HMRC introduced the Additional Information Form – a mandatory requirement for all R&D tax relief claims. This form aims to improve transparency and ensure that claims are supported by sufficient technical and financial detail from the outset.
To strengthen compliance and oversight, HMRC has significantly increased its internal resources, with over 500 staff now dedicated to R&D compliance in 2024–25. This number is up from just 100 in 2021–22, cementing the department’s commitment to tackling error and fraud in the system.
April 2024 marked a major structural shift in the R&D tax relief landscape. The previously separate SME and RDEC schemes were merged into a single R&D Expenditure Credit, alongside the introduction of the Enhanced R&D Intensive Support (ERIS) scheme. ERIS is specifically designed to support innovation-intensive SMEs, with the eligibility threshold lowered from 40% to 30% of total expenditure on R&D, making the scheme more accessible to a broader range of businesses.
To support these changes, HMRC has also ramped up its use of AI and advanced data analytics. These technologies are now central to the department’s approach to risk profiling, fraud detection, and targeted compliance activity, helping to ensure that relief is directed to genuinely innovative businesses.
HOW CP INNOVATION CAN HELP
At Cooper Parry, we’re already helping clients navigate these changes. Whether you’re new to R&D tax relief or need support adapting to the new merged scheme, our team of specialists can help you navigate these changes to ensure you remain fully compliant.
Want to chat about your R&D plans? Get in touch with us today.
