Voluntary disclosure means telling HMRC yourself that a past R&D claim was too high, before HMRC asks. HMRC runs a service built for exactly this. The penalty turns almost entirely on who spoke first. Where a claim was prepared carelessly and the company reports it before HMRC has any reason to suspect anything, the penalty can come down to nothing.
Two caveats. Suspecting a claim was wrong is not the same as knowing it was; read properly against the legislation, a shaky-looking claim can prove defensible. And an error is not automatically a penalty: where a claim was prepared with reasonable care, the relief goes back but no penalty arises. That is HMRC’s published position.
Should we disclose, or is there a simpler route?
Three common situations, and only one is a disclosure.
The return can still be amended. An R&D claim lives in the company tax return, so while that return is open to amendment, the correction goes there. The window usually runs for two years from the end of the period of account — the same window set out in backdated claims. HMRC’s guidance says specifically not to use the disclosure service while it is open. It is the cheapest route, so check the date before assuming it has gone.
The amendment window has closed. This is what the disclosure service is for: the return can no longer be amended, and there is corporation tax to pay or an R&D tax credit to pay back.
HMRC has already opened a compliance check. Then the correction is made through the enquiry itself. Cooperating fully still reduces any penalty, but the disclosure now counts as prompted, which lifts the bottom of the range. Our guide to HMRC R&D enquiries covers that process.
Two less common cases sit outside all three. Where the only consequence is an overstated loss — no tax to pay, no credit to repay — email HMRC’s R&D incentives team instead. Where the error is not an R&D overclaim, HMRC’s general disclosure route applies.
What does HMRC’s disclosure service involve?
An online form, calculations prepared beforehand, and a formal offer of the amount owed. You do not have to warn HMRC of your intentions; the disclosure is the first contact.
HMRC asks for the company’s details, the periods involved, the reasons for the inaccuracy, and your calculations of what is owed. Revised computations go with it — the full corporation tax computation for each year, not just the R&D part, and group relief unwinds with it. How many years the disclosure covers depends on the behaviour behind the error: four years from the end of the relevant period where reasonable care was taken, six years where the claim was careless.
The form ends with a letter of offer, part of a contract settlement, authorised by a director or anyone else with authority to contract for the company. HMRC then sends a payment reference number, usually within 15 calendar days. Within 30 calendar days it will accept the offer, ask for more information, or refuse it. If the company cannot pay in full, ask for time on the form; HMRC normally wants the full amount within 12 months.
One thing to know before you begin. Using the service to disclose that a penalty is due gives up the right to silence under Article 6 of the European Convention on Human Rights, and HMRC can use what you write when it works out penalties. Article 6 also gives you the right to take professional advice first — the sensible order to do these things in.
What does it cost?
Four things, and they stack.
The relief itself. The overclaimed amount goes back — corporation tax not paid, or SME credit or RDEC repaid. One trap catches companies out. Where an adviser took its fee out of the money before passing on the balance, HMRC requires the offer to be the full amount overclaimed. A company that used a percentage-fee adviser repays the money it received and the adviser’s fee on top, whether or not the adviser is still contactable.
Interest. Corporation tax carries interest daily from the due date until it is paid, at HMRC’s published late-payment rate. Overpaid credits split at 1 April 2023. For periods beginning on or after that date, interest runs from the day HMRC paid the credit to the day it is repaid. For earlier periods, HMRC charges no interest while it can still open an enquiry.
The penalty. This turns on behaviour, and on who spoke first. The percentage applies to the money at stake — the corporation tax underpaid, or the credit overpaid — not to the size of the claim it came out of. The published ranges are:
- Reasonable care. No penalty, whether the disclosure is prompted or not.
- Careless, unprompted. 0% to 30% of the overclaim. The only band where a penalty is in principle due but can still come down to nothing.
- Careless, prompted. 15% to 30%.
- Deliberate, unprompted. 20% to 70%.
- Deliberate, prompted. 35% to 70%.
- Deliberate and concealed. 30% to 100% unprompted, 50% to 100% prompted.
A disclosure is unprompted when you tell HMRC before you have reason to believe it has found the error, or is about to. Anything else is prompted.
Where you land inside a range depends on what HMRC calls the quality of disclosure: telling, helping and giving access, scored out of 30, 40 and 30. Those scores do not come off the penalty. They decide how far down the range it falls, and the range still has a floor. HMRC’s own example: a careless error, disclosed after HMRC asked, scoring 70% for cooperation, sits at 19.5% — not at the 15% bottom of the band, and nowhere near nil. Answering fully and quickly moves the number by several points. It does not erase it.
Delay costs part of that reduction. Where a company takes three years or more from the date of the inaccuracy to come forward, HMRC usually restricts the reduction to ten percentage points above the bottom of the range. It applies that restriction sooner where the disclosure spans a long stretch of years. For a careless error disclosed unprompted, the restriction turns a possible nil penalty into one of at least 10%.
Your own costs. Advisers, and the management time that goes into reconstructing years-old records, which is usually the larger of the two.
Correcting an SME claim that should have been RDEC
One route can cut the bill substantially, and it is easy to miss. Where a claim was made under the SME scheme when it should not have been, HMRC’s guidance sets out a two-step path: disclose the incorrect SME claim through the service, then submit the RDEC claim for the same period separately to HMRC’s late claims mailbox for consideration. HMRC weighs that claim on its merits and grants nothing automatically, but the difference to the net figure can be large.
What if the overclaim was deliberate?
Then this service is not the route, and you should take advice first.
The service covers errors made carelessly or despite reasonable care. Where the company knew the figures were wrong when the claim was made and chose not to say, the route is the Contractual Disclosure Facility, which operates under Code of Practice 9. It can only be used to admit tax fraud, and where a company is involved HMRC offers it to the individuals responsible. A person admits that deliberate behaviour brought about a loss of tax; in exchange HMRC agrees not to criminally investigate that behaviour with a view to prosecution. The protection holds only for behaviour fully and accurately disclosed. An incomplete admission buys nothing, and the signed letter is admissible in court. Nothing should go in writing to HMRC about a deliberate overclaim before an adviser has read the file.
The two labels are narrower than they sound. Careless describes how a claim was put together, not dishonesty. Deliberate means the company knew. Which applies is a question of evidence, and the gap between the bands is wide enough to be worth arguing.
Talk it through with a chartered adviser
The first conversation costs nothing and commits you to nothing, and our free claim review will tell you whether there is a problem at all. Where there is, quantifying it and preparing the disclosure is a separate engagement from claim preparation, at a fee agreed before that work starts.
LimestoneGrey is a firm of Chartered Tax Advisers and Chartered Accountants, regulated by ICAEW, specialising in R&D tax relief. Those obligations cut both ways here: we will not defend a claim that cannot be defended, and we will not help you disclose more than you owe.
Is coming forward really better than waiting?
Yes, and on HMRC’s published structure the gap is wide. Every band above reasonable care has a lower floor when the company speaks first, waiting erodes the reduction for disclosure quality, and interest runs daily throughout. HMRC publishes no figures on how disclosures turn out, so nobody can tell you how a particular case will end. What is documented is the penalty structure, and it rewards going first.
Where to start
Find out whether there is a problem before HMRC asks. Nothing is admitted by reading your own file: the claim as filed, the projects against the statutory definition, the costs against the records behind them. It takes less time than the worrying does, and it tells you whether you are facing a disclosure, an amendment, or nothing at all.
Call 0330 223 4 223 or get in touch. Nothing goes to HMRC until you have decided it should.
Sources
- Tell HMRC if you’ve claimed too much Research and Development (R&D) tax relief — HMRC’s R&D disclosure service: who can use it, when not to, the information and computations required, the 4-year and 6-year period limits, the letter of offer, the 15-day payment reference and 30-day HMRC response, time to pay within 12 months, the gross-not-net rule where an agent deducted fees, the interest treatment by period, Article 6 rights, and the SME-to-RDEC route via the late claims mailbox.
- CC/FS7a: penalties for inaccuracies in returns or documents — the six penalty ranges by behaviour and disclosure type; no penalty where reasonable care was taken; the telling (30%), helping (40%) and giving access (30%) reductions applied to the span between the minimum and maximum of the range; the restriction to ten percentage points above the minimum where disclosure takes three years or more.
- CH82470: penalty ranges — the same ranges in HMRC’s Compliance Handbook: careless 30% maximum with a nil minimum unprompted and 15% prompted; deliberate 70% with 20% and 35%; deliberate and concealed 100% with 30% and 50%.
- Finance Act 2007, Schedule 24 — the statutory penalty structure for inaccuracies, the behaviour categories, and potential lost revenue as the base the percentages apply to.
- Admit tax fraud to HMRC using the Contractual Disclosure Facility — the route for deliberate behaviour; usable only to admit tax fraud; offered to the responsible individuals where a company is involved; HMRC agrees not to criminally investigate the disclosed behaviour with a view to prosecution, where the disclosure is full and accurate.
- FA 1998 Sch 18 para 15 and CIRD81800 — an amendment may not be made more than twelve months after the filing date, and R&D claims are made, amended or withdrawn in the company tax return.
- Make a voluntary disclosure to HMRC — the general disclosure route for matters other than overclaimed R&D relief.
- HMRC interest rates for late and early payments — the late-payment rate applied to overdue corporation tax.