Signs Your R&D Adviser Is Overclaiming, and What It Costs Your Company
29 Sept 2026 · Unlocked · 11 min read
An overclaim is relief taken for work that does not qualify, for costs that cannot go in a claim, or for staff time the records do not support. The signs your R&D adviser is overclaiming usually show before the claim is signed, in figures nobody in the company can explain and fees that grow with the claim. If HMRC finds the overclaim, the company repays the relief with interest and may pay a penalty. How much is R&D tax relief worth to the company, and is R&D tax credit worth it at all, then turns on how much of its research and development tax relief claim survives the check.
Why Advisers Overclaim
Many R&D advisers are paid a share of the relief they secure, so a larger claim earns a larger fee. Edwin Coe LLP, a law firm that acts in disputes over misadvised claims, gave its view of market practice on 13 January 2025: "some advisors may encourage taxpayers (knowingly or unknowingly) to push the boundaries of eligibility to secure larger claims". The company usually sees only the finished claim and the expected credit, so the signs your R&D adviser is overclaiming have to be read from the claim and the adviser's terms.
Seven Warning Signs an Adviser Is Overclaiming
These R&D adviser red flags come from two firms' published lists. Azets, a UK accountancy firm, gave the first four as practices HMRC scrutinises in unscrupulous advisers (Azets, 11 December 2025). Swanson Reed, a US firm writing about the US credit, gave the last three (Swanson Reed, December 2025).
- Unrealistic savings. The adviser makes wholly unrealistic claims about the tax the company will save.
- Pressure to engage. The approach pressures the owner into making contact.
- A long tie-in. The engagement locks the company in for up to five years.
- A fee with no R&D confirmed. The adviser charges for a claim even where the company has confirmed it did no R&D.
- A contingency fee. The fee is a percentage of the relief, which rewards a bigger claim over a defensible one.
- A very short timetable. The adviser promises a complex claim in an extremely short time.
- 100% staff allocation. Staff with non-R&D duties are claimed at 100% of their time.
What belongs in a claim in the first place is covered in Missing Costs in an R&D Claim: What Companies Routinely Leave Out.
What HMRC Is Doing About Overclaimed Claims
On R&D tax relief HMRC has raised its compliance coverage: it received 61,000 R&D claims in 2023 to 2024 and opened compliance checks on 9,700 of them, 17% of claims; 77% of the claims it checked needed adjustment, and it identified £441 million as incorrectly claimed (HMRC, "Approach to Research and Development tax reliefs 2023 to 2024", published 30 October 2024). The same report estimates error and fraud across the R&D reliefs at 7.8% in 2023 to 2024, £0.6 billion.
Azets reported on 11 December 2025 that HMRC's enforcement against advisers has included dawn raids and arrests. For what happens once a claim is checked and refused, see Why R&D Tax Relief Claims Get Rejected: The Most Common Mistakes.
What an Overclaim Costs the Company
The answer to how much is R&D tax relief worth changes once relief has to be paid back. The company repays every pound it was not entitled to, with interest, and may pay a penalty on the same amount. Where an agent deducted its fee before paying the company, the company still repays the full amount overclaimed, not the net sum it received (GOV.UK, "Tell HMRC if you've claimed too much R&D tax relief", last updated 14 August 2026).
Interest runs at HMRC's late payment rate, 7.75% from 9 January 2026 (GOV.UK, "HMRC interest rates for late and early payments", updated 23 December 2025). For overpaid R&D credits in accounting periods beginning on or after 1 April 2023, it runs from the date the credit was paid until it is repaid (GOV.UK disclosure guidance, last updated 14 August 2026).
The Penalty Ranges HMRC Applies
R&D tax claim penalties are a percentage of the amount at stake, set by the company's behaviour and by whether it told HMRC before HMRC found the error (HMRC factsheet CC/FS7A, last updated 21 July 2026):
| Behaviour | Unprompted disclosure | Prompted disclosure |
|---|---|---|
| Reasonable care | No penalty | No penalty |
| Careless | 0% to 30% | 15% to 30% |
| Deliberate | 20% to 70% | 35% to 70% |
| Deliberate and concealed | 30% to 100% | 50% to 100% |
The factsheet reduces a penalty by up to 30% for telling HMRC, up to 40% for helping and up to 30% for giving access to records. It also states: "We won't charge you a penalty for an inaccuracy if you took reasonable care to get things right, but your return or document was still wrong."
Worked Example: A £50,000 Overclaim
This R&D tax relief example takes £50,000 of relief a company was not entitled to, claimed through a careless inaccuracy and found a year later:
- Relief repaid: £50,000
- Interest for one year at 7.75%: £50,000 × 7.75% = £3,875
- Penalty, unprompted disclosure: 0% to 30% of £50,000 = £0 to £15,000
- Penalty, prompted disclosure: 15% to 30% of £50,000 = £7,500 to £15,000
- Total at the top of the careless range: £50,000 + £3,875 + £15,000 = £68,875
The example assumes 7.75% holds for the year and the penalty is charged on the full £50,000.
Who Answers to HMRC: The Company, Not the Adviser
The claim sits in the company's own tax return, so the company answers to HMRC for it. HMRC's factsheet CC/FS7A (last updated 21 July 2026) says a taxpayer who uses an adviser "must do everything you reasonably can to prevent any inaccuracies". Recovering losses from the adviser is a separate professional negligence matter, a route Edwin Coe LLP describes in its page of 13 January 2025. Who Signs Off a Tax Relief Claim: Your Accountant, a Specialist or HMRC? sets out who does what on a claim.
What to Do If the Claim Has Already Overclaimed
A company holding overclaimed R&D tax relief can usually amend its Company Tax Return within 12 months of the filing deadline (GOV.UK, "Company Tax Returns: making changes"). After that, it uses HMRC's disclosure service. GOV.UK warns that a company "may be charged extra interest and penalties if they wait for HMRC to contact them", and that HMRC may open a criminal investigation (disclosure guidance, last updated 14 August 2026). Once HMRC has started a check, a disclosure counts as unprompted only in exceptional cases (CC/FS7A, last updated 21 July 2026).
The R&D Disclosure Service
The R&D tax disclosure service is HMRC's online form for overclaimed relief that can no longer be corrected in the return (GOV.UK guidance published 31 December 2024, last updated 14 August 2026).
- Periods covered: up to 4 years from the end of the relevant period where the company took reasonable care, or 6 years where it was careless.
- Deliberate overclaims: these go through the Contractual Disclosure Facility instead.
- Payment reference: HMRC usually sends one within 15 calendar days of the disclosure.
- Time to pay: where the company asks for more time, HMRC usually asks for the full amount within 12 months.
Ask the Adviser to Show You the Rule
For every element of the claim, the adviser should name the rule it relies on, in the R&D tax relief legislation or HMRC's guidance, and show the working papers behind the figure. HMRC's Guidelines for Compliance GfC3 sets out how HMRC tests whether work qualifies.
An inflated claim often shows in a project boundary drawn wider than the work that resolved the uncertainty, covered in where an R&D project starts and stops. Working papers record what was claimed; they do not prove it qualifies. HMRC does not approve a claim before it is filed, so an unchecked claim is not evidence the claim is correct.
Is the Relief Still Worth the Risk?
Is R&D tax credit worth it for a company with genuine development work? Yes, at the figure its records support. A director asking is R&D tax credit worth it at the adviser's higher figure should set that claim against the worked example, where £50,000 overclaimed became up to £68,875 to pay back, and against the 17% of claims HMRC checked in 2023 to 2024 (HMRC, published 30 October 2024).
Checking the Claim Before You Sign It
Before signing, ask three questions of each element of the claim: which rule it relies on, which working papers support it, and whether the adviser can explain it without the file. A director who sees the signs your R&D adviser is overclaiming should have the claim reworked before it is filed. If the adviser is the problem, the questions to ask an R&D adviser before appointing one apply to the replacement.
Frequently Asked Questions
Next Step: Size the Claim on the R&D Claim Estimator
Run the R&D claim estimator on the company's own R&D spending to see how much is R&D tax relief worth on figures it can defend, and compare that with the claim the adviser has prepared before signing it.
