HMRC getting tougher on R&D claims
HMRC getting tougher on R&D claims
HMRC’s annual report published today suggests that the tax authority is getting much tougher on historic R&D tax relief claims it suspects may be incorrect or fraudulent.
The new statistics show that the tax under consideration in R&D investigations being carried out by HMRC’s Wealthy and Mid-sized Business Compliance Directorate has doubled over the past year to reach £641m in 2023/24.
Over the last few years, there has been increasing concern about the level of fraud and error in R&D claims. Last year, HMRC published a new analysis of R&D claims in 2020-21 which estimated that almost a quarter (24.4%) of claims by value in the SME scheme and 3.6% of claims in the RDEC scheme were either incorrect or fraudulent – with a combined cost to the Exchequer of an estimated £1.13bn.
While today’s report shows the estimated level of “error and fraud” in claims for 2022/23 is almost unchanged, HMRC estimates that its policy and operational measures in 2023/24 – notably the introduction of the Additional Information Form - will have reduced the overall level of error and fraud in claims to 7.8% overall (down from 13.3% in 2022/23).
Commenting on the report, Carrie Rutland, Innovations Incentives partner at accountancy and business advisory firm BDO said:
“We’ve been aware of an increase in HMRC activity in relation to historic R&D claims. Buried in the detail of today’s report are clear signs that the tax authority is getting much tougher when it comes to investigating past claims it thinks were wrong or fraudulent. In our view, the published increases in tax under consideration must equate to a lot more R&D investigations.
“With an increase in targeted HMRC activity, many businesses may find they are subject to an enquiry triggering a large clawback in R&D tax credits. Many will require specialist advice to ensure their claims, both historic and current, are watertight.”
ENDS
The organisations we work with are Britain’s economic engine; entrepreneurially-spirited, high-growth businesses that fuel the economy.
We understand the ambitions and entrepreneurial mindset of those we work with and have the global reach, integrity and expertise to help people and businesses succeed.
BDO LLP
BDO LLP operates in 17 offices across the UK, employing 8,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.
BDO’s global network
The BDO global network provides business advisory services in 166 countries and territories, with more than 115,000 people working out of 1,776 offices worldwide. It has revenues of US$14bn.
Email: frank.x.shepherd@bdo.co.uk
Tel: 07812 463601
The new statistics show that the tax under consideration in R&D investigations being carried out by HMRC’s Wealthy and Mid-sized Business Compliance Directorate has doubled over the past year to reach £641m in 2023/24.
Over the last few years, there has been increasing concern about the level of fraud and error in R&D claims. Last year, HMRC published a new analysis of R&D claims in 2020-21 which estimated that almost a quarter (24.4%) of claims by value in the SME scheme and 3.6% of claims in the RDEC scheme were either incorrect or fraudulent – with a combined cost to the Exchequer of an estimated £1.13bn.
While today’s report shows the estimated level of “error and fraud” in claims for 2022/23 is almost unchanged, HMRC estimates that its policy and operational measures in 2023/24 – notably the introduction of the Additional Information Form - will have reduced the overall level of error and fraud in claims to 7.8% overall (down from 13.3% in 2022/23).
Commenting on the report, Carrie Rutland, Innovations Incentives partner at accountancy and business advisory firm BDO said:
“We’ve been aware of an increase in HMRC activity in relation to historic R&D claims. Buried in the detail of today’s report are clear signs that the tax authority is getting much tougher when it comes to investigating past claims it thinks were wrong or fraudulent. In our view, the published increases in tax under consideration must equate to a lot more R&D investigations.
“With an increase in targeted HMRC activity, many businesses may find they are subject to an enquiry triggering a large clawback in R&D tax credits. Many will require specialist advice to ensure their claims, both historic and current, are watertight.”
ENDS
Note to editors
Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.The organisations we work with are Britain’s economic engine; entrepreneurially-spirited, high-growth businesses that fuel the economy.
We understand the ambitions and entrepreneurial mindset of those we work with and have the global reach, integrity and expertise to help people and businesses succeed.
BDO LLP
BDO LLP operates in 17 offices across the UK, employing 8,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.
BDO’s global network
The BDO global network provides business advisory services in 166 countries and territories, with more than 115,000 people working out of 1,776 offices worldwide. It has revenues of US$14bn.
Contacts
Frank ShepherdEmail: frank.x.shepherd@bdo.co.uk
Tel: 07812 463601