HMRC's proposed criminal offence for reckless untrue statements: what it means for R&D claims

On 23 June 2026 HMRC published a consultation proposing a new criminal offence for direct tax: recklessly making an untrue statement or declaration. The measure was announced at Autumn Budget 2025. The consultation closes on 16 August 2026.

The offence would mirror two provisions that already exist for indirect tax. Section 167(1) of the Customs and Excise Management Act 1979 and section 72(3) of the Value Added Tax Act 1994 both criminalise reckless untrue statements, for customs and excise matters and VAT respectively. No equivalent provision exists for income tax or corporation tax. To convict for a direct tax offence, the prosecution must currently prove dishonesty to the criminal standard.

The consultation describes the gap the offence would fill. Currently, in direct tax cases, where a jury is unsure that a defendant acted dishonestly but is sure that a reckless false statement was made, the defendant is acquitted. HMRC proposes that the jury should instead be able to return a verdict on a lesser charge of recklessness. The proposed maximum sentence on indictment is two years imprisonment, an unlimited fine or both.

Careless, reckless, deliberate, dishonest

The proposal turns on the boundary between four behaviours, each with an established legal meaning for direct tax purposes.

Behaviour	Definition	Civil consequence	Criminal consequence (direct tax, current)
Careless	Failing to take reasonable care (Schedule 24 Finance Act 2007, paragraph 3(1)(a))	Penalty up to 30% of the potential lost revenue	None
Reckless	Aware of a risk, and unreasonable in the circumstances known to the person to take it (R v G [2003] UKHL 50)	None distinct; treated as careless	None. This is the gap the offence would fill
Deliberate	An inaccuracy that is deliberate (Schedule 24, paragraph 3(1)(b) and (c))	Penalty up to 100%	Likely dishonest, so prosecutable as evasion or fraud
Dishonest	Conduct dishonest by the standards of ordinary decent people, judged on the person's actual knowledge (Ivey v Genting Casinos [2017] UKSC 67)	As deliberate	Up to 14 years for evasion; life for cheating the public revenue

Two points in that table matter more than the rest.

First, recklessness requires actual awareness. The consultation adopts the test in R v G: the maker of the statement was aware of the risk that it was untrue and unreasonably proceeded regardless. HMRC states that it would not suffice that the person ought to have known, or was careless. That is a subjective test, and it is the right one.

Second, the civil penalty regime does not separately recognise recklessness at all. Schedule 24 moves from careless to deliberate with nothing between. This means that a reckless error currently attracts the careless civil penalty.

One further definition is worth noting. The consultation confirms that a statement of belief, such as "to the best of my knowledge and belief", is true so long as it genuinely reflects what the person believed at the time, even if that belief later proves wrong. For declarations on returns and R&D additional information forms, that confirmation matters a lot.

HMRC's own examples

The consultation includes a table of worked examples intended to show where the boundary falls. The second example is a taxpayer who claims a significant tax relief, does not read the relevant guidance properly, does not seek advice or clarification and submits the claim anyway because "it is probably fine". HMRC's view is that in these circumstances, this taxpayer recognises a risk and proceeds without taking reasonable steps. If the claim is later found to be incorrect by HMRC, that behaviour is reckless and within the proposed offence.

The above example names business expenses or losses, but this situation reads equally well as a description of a poorly prepared or inadequately checked R&D tax relief claim.

The facts listed are the current standard indicators of carelessness. Not reading guidance and not seeking advice are the matters a compliance officer seeks to establish today when considering a careless penalty. The conclusion that the taxpayer recognised a risk and was reckless is asserted by HMRC's later assessment of what it believes the behaviour to have been at the time.

Reassuringly, the consultation confirms that errors arising from a failure to take reasonable care would continue to be addressed through existing civil regimes and would not fall within the scope of any new offence, but determining whether an action was careless or reckless could become a contentious aspect of future direct tax enquiries, if and when this new legislation is enacted.

Relevance for R&D tax relief claims

R&D tax relief is the part of direct tax where the distance between a reasonable position and HMRC's preferred position has been widest, and where that distance has needed to be tested in the courts.

The disputes over subcontracted and subsidised expenditure are a prime example. In Quinn (London) Ltd, Collins Construction Ltd and Stage One Creative Services Ltd, the First-tier Tribunal rejected interpretations of the legislation that HMRC had advanced and applied in enquiries over several years. Claimants who took the position HMRC disputed were, on the tribunal's analysis, right. Under a recklessness offence, a claimant filing the same position today would know that HMRC might disagree. However, until the tribunal ruled, those same positions would have looked, from inside HMRC, like exactly the conduct the new offence describes. Unfortunately, most disputed positions never reach a tribunal at all, because litigating against HMRC is slow and costly for the taxpayer, so some claimants who are right are never shown to be.

There is also a potential contradiction here around awareness. Awareness that HMRC might disagree with a claim is not awareness that a factual statement being made to HMRC is untrue. The first situation describes every finely balanced position ever taken in this regime. The second is what the offence requires. A prosecution regime that cannot hold that distinction converts uncertainty of interpretation into criminal exposure, and R&D relief often runs on uncertainty of interpretation: whether an advance in science or technology was sought, whether an uncertainty was one a competent professional could not readily resolve, whether a subcontracted activity falls within the rules.

The current backdrop also makes this highly relevant. HMRC's own statistics record R&D tax claim volumes falling significantly in recent years following the reforms and a tightened compliance regime: from a peak of around 87,000 in 2020/21 to 46,950 claims in 2023/24, down 26% on the previous year. The relief exists because Parliament decided to incentivise companies to do more R&D. Any measure that causes companies with sound claims to stop making them could further reduce the behaviour the relief was designed to encourage.

This is why the consultation needs responses from people who have seen R&D compliance from both sides.

What a well-advised claimant should take from this

The new offence, as proposed, points in one direction for claimants: towards maintaining a proper audit trail.

Identifying an uncertainty, considering it properly and recording a reasonable conclusion points away from recklessness, not towards it. So does reasonable reliance on competent professional advice, sought before the claim is submitted rather than after an enquiry. The claimants exposed under this offence will not be the ones who examined a difficult question, documented it and reached a defensible answer. They will be the ones whose advisers never explained the risks and responsibilities of making an R&D claim, or who blindly signed off a claim prepared by an adviser with minimal input or review.

Nothing in the proposal criminalises an unsuccessful claim. A later HMRC conclusion that a project does not qualify is not evidence that anyone was aware, at filing, of a risk that a factual statement was untrue. The offence requires proof of what the person actually knew at the time and what they unreasonably failed to do in response to that knowledge, established to the criminal standard.

Our response

Adviser Radar is submitting a response before the consultation closes on 16 August. In summary, we support the offence in principle. Conscious risk-taking with information supplied to HMRC in pursuit of a tax advantage should be capable of carrying consequences that the current provisions do not allow.

Our concerns are about where the boundary sits. We ask for a materiality requirement, so that the offence cannot reach trivial errors the equivalent customs and VAT offences would not touch. We ask that awareness of risk be proved by evidence of what the person actually knew, not inferred from the fact that an error occurred, from retrospective HMRC opinion or from a later challenge to the claim.

Our full response, as submitted to HMRC on 12 August 2026, is now published: Our response to HMRC's consultation on introducing a criminal offence for making reckless untrue statements.

What happens next

HMRC will publish a summary of responses, together with any draft legislation, some time after 16 August 2026. Any offence would require primary legislation in a future finance bill.