# Her Majesty's Revenue & Customs (HMRC) Research and Development (R&D) Tax Credit

Her Majesty's Revenue & Customs (HMRC) Research and Development (R&D) Tax Credit is a Tax Authority based in London, United Kingdom.

## Overview

- **Organization type:** Tax Authority
- **Headquarters:** London, United Kingdom
- **Region:** North America
- **Address:** London, United Kingdom
- **Assets under management:** Undisclosed
- **Website:** gov.uk/government/organisations/hm-revenue-customs

## Regulatory record

- **Reports private funds:** No

## About

HMRC launched the modern R&D tax credit regime in 2000, replacing earlier reliefs with a structured scheme designed to increase UK business investment in research and development. The policy sits within the Corporation Tax Act 2009 and has been revised multiple times, including a 2023 focus on countering abuse through additional compliance measures. HMRC operates as the sole adjudicator, not as an investor. The R&D tax credit provides two main relief types. The SME scheme offers up to 33p per £1 of qualifying expenditure for loss-making firms through a payable credit. The Research and Development Expenditure Credit (RDEC) targets large companies, offering a 15% taxable credit. Qualifying activities include software development, advanced manufacturing, life sciences R&D, and engineering. HMRC reported processing over 60,000 claims in 2022-23 and maintains a compliance team that opened 2,210 enquiries in 2022-23 (per HMRC annual report, 2023). HMRC employs over 60,000 staff but does not separately disclose the size of its specialist R&D team. The agency operates from regional centers including Manchester, Edinburgh, and Cardiff. HMRC's R&D unit also administers the Patent Box regime, which taxes qualifying IP profits at 10%. The government announced in 2023 that R&D tax reliefs cost the Exchequer £7.1 billion in 2021-22 (per HMRC R&D Tax Credits Statistics, September 2023). HMRC's structural differentiator is its dual role as both policy administrator and compliance enforcer. Unlike private innovation-led funds, HMRC's R&D unit has no return target or deployment mandate — it processes claims against statutory tests and can deny relief where activities fail the definition of R&D under the BIS guidelines. This adversarial posture shapes all market behavior: claimants must document technical advancements to pass HMRC's review.

## Sectors

- Tax
- Government
- R&D

## Questions

### Does HMRC's R&D unit provide advance assurance or pre-approval for specific projects?

No. HMRC does not issue pre-approval certificates for R&D tax credit claims. The sole route to certainty is filing a claim and awaiting HMRC's assessment. However, for the Advanced Assurance Service (for companies with no R&D history), HMRC will review a draft claim and issue a non-binding opinion — that program was piloted in 2023 and is limited to small companies.

### How does HMRC prevent abuse or error in R&D tax credit claims?

HMRC operates an R&D compliance team that conducts risk-based enquiries. In 2022-23, the agency opened 2,210 enquiries, recovering £1.1 billion in incorrect or fraudulent claims (per HMRC Annual Report, 2023). HMRC uses sector-based risk models, and in 2023 introduced mandatory digital submission and numeric claim-cost breakdowns to reduce error. The agency also publishes guidance on what does not qualify, such as routine software UI work.

### What is the difference between the SME scheme and RDEC?

The SME scheme applies to companies with fewer than 500 employees and turnover under €100 million or balance sheet under €86 million. It provides a 186% super-deduction and, for loss-making firms, a payable credit of up to 24.7p per £1 of spend. RDEC is for large companies and offers a 15% taxable credit, effectively worth about 11-12% after tax. RDEC was recently expanded to cover certain previously excluded activities like cloud computing costs.

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Last updated: 2026-06-03T20:00:00.000Z

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