2nd September 2025
3 min read
How are HMRC’s latest compliance measures reshaping R&D tax relief? The 2024/25 Annual Report reveals £8.2bn of reliefs, falling error and fraud estimates, and what claimants can expect next.
HMRC publishes its Annual Report and Accounts to demonstrate how it has performed over the past financial year and to be accountable to Parliament and the public. As a government department, it is required to report on its activities, performance, and financial management.
The latest edition – published in July – contains:
→ Financial Statements: tax and duties collected and the cost of running HMRC
→ Performance Review: how have they performed against its strategic objectives.
→ Narrative and Strategic Context: how HMRC is adapting to changes in the economy, such as the rise of digital transactions and new working patterns.
→ Organisational Information: details about its structure, workforce, and its progress in modernising the tax system through initiatives like Making Tax Digital.
HMRC faces several challenges. The number of taxpayers is increasing, and their tax affairs are becoming more complex. Over the past decade, both the global economy and the nature of work have changed dramatically. We now live in an era of multiple incomes, side hustles, digital transactions, artificial intelligence, and cryptocurrencies. As the economy and our customers’ work patterns evolve, our approach to compliance must also adapt.
This year’s publication includes a wealth of information related to R&D tax credits, much of which focusses on their efforts to reduce error and fraud. The figures below are the first to take account of policy and operational changes made since 2022 – including the introduction of the Additional Information form in August 2023 and increased compliance activity.
In the financial year 2022-23, an estimated £759 million (9.9%) of the total £7.7 billion spent on Corporation Tax R&D tax reliefs was lost to error and fraud. The SME scheme accounted for £652 million (14.7%), the remainder – £107 million (3.3%) is RDEC-related. This represents a significant reduction in error and fraud – around £578 million overall – compared to the previous year (2021-22).
The way these figures are calculated has also changed. For the first time, the estimate is based on an accruals basis, which means it only includes expenditure incurred in the 2022-23 accounting period. Looking ahead, HMRC estimates that error and fraud will continue to fall due to the new policy changes, suggesting a reduction to 6.5% (£497 million) in 2023-24 and 5.9% (£481 million) in 2024-25.
Expenditure on R&D reliefs during the year 2024 to 2025 was £8.2 billion. In the report, HMRC highlights efforts to actively balance their work to reduce error and fraud with the need to pay legitimate claims promptly. They claim to have exceeded their published aim to process 85% of claims within 40 days during 2024 to 2025, achieving 90% during this period.
If you have any questions relating to R&D Tax Relief or wish to further discuss how it might benefit your own business, please get in touch with ABGi , and a representative will get back to you to discuss your unique needs and explain how we can assist.