HMRC must not penalise genuine claimants when tackling research and development tax fraud

Ele Theochari, Partner and R&D specialist said:

HMRC’s persistence in tackling R&D tax relief fraud and error has resulted in the projected estimated value of taxpayer’s money ‘lost’ halving from £1.127bn in 2020-21 to £601m in 2023-24. While that figure is still unacceptably high, this is good progress.

However, incentivising innovation and growth in the UK must also remain a priority, particularly for SMEs, who are the lifeblood of the British economy. The new Government and HMRC should take care to not further water the relief down or continue to add complexity to the point that it puts SMEs off claiming R&D tax relief entirely. Doing so would be using a hammer to crack a nut when HMRC is clearly succeeding in reducing fraud and error.

One of the key areas HMRC must focus on, in the context of R&D tax reliefs and wider taxes, is working effectively with the taxpayers, particularly where genuine mistakes have been made. It has been widely commented on, including by the House of Lords, that the approach taken in enquiries has led to a disconnect between advisors, business owners and HMRC. It will be interesting to see how HMRC is able to grapple with administering and policing R&D claims over the next 2-3 years where there will be claims being made under the ‘old’ two schemes, the new merged scheme, and the new SME ‘intensive’ scheme.

The effects of the biggest changes to the R&D tax relief scheme in 20 years are beginning to be felt; SMEs that aren’t deemed ‘intensive’ have already had their support cut substantially, however I hope that HMRC will support genuine claimants through their R&D journey.

Would you like to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Ele Theochari using the form below