R&D Tax Relief Reset: Why Specialist HMRC Units Should Return

July 28, 2026

By Malcolm Henderson, Compliance Director

The UK’s R&D tax relief system has become more complex, less accessible and increasingly difficult for genuine claimants to navigate.

It was not always this way. As a former leader within HMRC’s specialist R&D Units, I saw first-hand how experienced inspectors, direct engagement with businesses and strong sector knowledge helped the relief achieve its purpose: supporting genuine innovation while identifying and challenging abuse.

That balance has gradually been lost. If the government is serious about restoring confidence in the scheme, it should begin by rebuilding the specialist expertise that once made it work.

New PM, R&D Reset?

R&D tax relief was introduced by Gordon Brown through the Finance Act 2000. HMRC’s specialist R&D Units were established in November 2006, at a time when Andy Burnham was serving as a senior minister at the Treasury.

Before those units were created, claims were handled somewhat inconsistently by local tax offices across the UK. The specialist model brought greater expertise, consistency and understanding to the administration of the relief.

The units were staffed by trained and experienced inspectors. They had the resources to visit companies, attend industry exhibitions and develop valuable sectoral and local knowledge. Their role was twofold: to encourage eligible businesses to claim and to police the relief properly.

Before the units were created, R&D claims were handled somewhat inconsistently by local tax offices across the UK. The specialist model brought greater expertise and helped the scheme develop.

The relief also became increasingly valuable. The additional SME deduction began at 50%, later rising to 125% and then 130% under the Coalition Government. Before RDEC was introduced, large companies could use the relief to reduce taxable profits or increase losses.

What went wrong?

Over time, the specialist R&D Units were gradually closed, beginning with Cambridge. Valuable knowledge and experience were lost, while a certain type of R&D adviser emerged to fill the gap.

A series of complicated policy changes then followed, largely intended to address rising fraud and error:

Individually, these changes may have been introduced with a clear policy objective. Collectively, however, they have made the scheme more difficult for businesses to understand and navigate.

Complexity does not necessarily improve compliance. In many cases, it places a greater burden on genuine claimants while failing to address the underlying problem: a lack of specialist oversight.

 

The impact on genuine claimants

HMRC’s Volume Compliance Programme and its ISBC approach also had a damaging effect on legitimate claims.

Many genuine claimants simply did not have the time or resources to continue challenging HMRC, even where they believed their position was correct. Some abandoned claims because the cost and disruption of defending them became too great.

Where we believed a claim was genuine and were able to defend it fully, we have never lost a case against HMRC.

Fraud Investigation Service nudge letters were also unnecessarily heavy-handed, creating concern among compliant businesses and making legitimate claimants feel as though they were under suspicion.

A robust compliance regime is essential. Public money must be protected, and abusive claims should be challenged firmly. However, the system must also be capable of distinguishing between deliberate abuse, poor-quality advice and genuine technical disagreement.

Without specialist expertise, that distinction becomes much harder to make.

 

Time for a reset?

Rachel Reeves was right to leave the scheme largely untouched for a period, allowing the previous changes time to bed in. The new Prime Minister’s Treasury experience may now provide an opportunity for a more fundamental reset.

The priority should be to reintroduce properly resourced specialist R&D units. I would suggest regional teams covering the South, Midlands, North, Wales and Scotland, with a further specialist unit for Northern Ireland because of its distinct post-Brexit rules. These teams must be knowledgeable, accessible and able to engage directly with businesses and advisers.

The government should also consider restoring a benefit of up to 33p in the pound for genuinely innovative SMEs. Smaller businesses face the greatest technical and financial risks when investing in uncertain development, and the relief should properly reflect that.

A return to what worked

I disagreed with many of the recent changes because, in my view, they would not have been necessary had HMRC retained its expertise and identified rogue providers earlier.

The answer is not another layer of forms, guidance or procedural complexity.

A credible R&D tax relief system must do two things well: protect public money from abuse and provide meaningful support to businesses undertaking genuine innovation. These objectives are not in conflict.

With properly resourced specialist teams, stronger sector knowledge and more constructive engagement between HMRC, advisers and claimants, the government could rebuild confidence in the relief while targeting non-compliance more effectively.

Ultimately, I am advocating a return to what worked: specialist inspectors, meaningful engagement, firm action against abuse and valuable support for genuine innovation.

The UK does not need a less rigorous R&D tax relief system. It needs a more knowledgeable, proportionate and effective one.

 

Next Steps

Get in touch with Bonham & Brook’s Compliance Team to begin your assessment today. For expert support in navigating these complexities, contact us here.

 

 

Malcolm Henderson

Compliance Director

 

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