Can HMRC claw back R&D tax credits already paid?

HMRC can recover R&D tax credits it has already paid out. Paying a claim does not mean HMRC has agreed it is correct.

Most R&D payments are made after a light-touch check, not a full review. HMRC keeps the right to open a compliance check or raise a discovery assessment later, once it has reason to think the claim overstated qualifying costs or activities.

If that happens, you may have to repay the credit, interest on the overpaid amount, and in some cases a penalty for an inaccurate return.

R&D relief for accounting periods under the merged scheme sits in Part 13 Corporation Tax Act 2009 (opens in a new tab) at legislation.gov.uk. The rules set out what counts as qualifying R&D expenditure and how the credit is calculated.

Where HMRC believes tax has been under-assessed because of an inaccurate claim, it can use the discovery provisions in Schedule 18 Finance Act 1998, paragraph 24, to reopen the position outside the normal enquiry window.

The time limit for a discovery assessment depends on behaviour. Where reasonable care was taken but the claim was still wrong, the window is shorter than where HMRC concludes the error was careless or deliberate.

HMRC can also use Schedule 36 Finance Act 2008 to demand records supporting the original claim before deciding whether to assess.

As a director, you are personally responsible for the accuracy of the company's claim, even where an adviser prepared it. HMRC will write to the company, not to the adviser.

If HMRC opens a check, gather the original technical narrative, cost breakdowns, and any contemporaneous project records. The stronger your evidence that the work met the R&D definition, the better your chance of resisting the assessment.

Do not spend a received credit assuming it is final. Treat it as provisional until the enquiry window has closed or HMRC has confirmed it will not check the claim.

If the assessment stands, you repay the credit, interest calculated under the current HMRC rate, and possibly a penalty of up to the statutory maximum for the behaviour involved.

Professional fees to respond properly can be significant, particularly where technical R&D arguments are involved. Growth plan clients get free tax investigation insurance included, which covers our fees for defending an enquiry like this — see /fees for details.

Acting early, before HMRC escalates to a formal assessment, generally costs less than fighting a completed decision at tribunal.

Do not assume payment equals approval. HMRC's initial processing checks are not the same as a full compliance review.

Do not ignore an R&D enquiry letter hoping it will go away; missed deadlines weaken your appeal rights.

Do not rely solely on your original adviser's file if they are no longer contactable — get an independent review of the claim's technical and cost basis before responding.