Business claims for R&D tax relief face greater scrutiny from HMRC
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Posted: Tue 8th Aug 2023
Businesses making a claim for research and development (R&D) tax relief now need to fill in an extra form as part of the government's efforts to tackle fraud.
Starting today (8 August 2023), businesses or their R&D advisers have to fill in an 'additional information form' which is designed to allow HM Revenue & Customs (HMRC) to quickly assess the validity of a claim and work out the level of expertise involved in preparing it.
The change is part of the steps being taken by HMRC to deal with high levels of fraud associated with businesses seeking R&D tax relief.
Official figures released last month show fraud during 2020-21 was 16.7% (£1.13bn), significantly higher than the previously published estimate of 3.6% (£336m).
To deal with the problem, the government's Autumn Statement last November announced that the SME R&D tax relief scheme would decrease from 130% to 86%, while the SME credit rate was reduced from 14.5% to 10%.
The move received much criticism and this year's Spring Budget partially reversed the change by introducing an increased rate of relief for loss-making R&D intensive SMEs, although this only applies to around 20,000 businesses.
The government has also published draft legislation for turning the UK's current two research and development tax relief schemes into one.
Carrie Rutland, innovation incentives partner at accounting firm BDO, said the extra details required for claims will "pose significant challenges for businesses". She added:
"For the many businesses that are genuinely carrying out groundbreaking R&D, the changes being introduced from today may seem overly bureaucratic, particularly for large groups submitting multiple claims. However, given the high estimated levels of error and fraud associated with R&D claims, it’s no great surprise that HMRC is keen to clamp down on non-compliance.
"Businesses involved in R&D will need to ensure they are clearly demonstrating their qualifying activities to HMRC. Failure to do so may mean they run the risk of an HMRC enquiry. The department has recently added 300 new officers to its R&D team which suggests it's getting serious about stamping out error and fraud."
Relevant Enterprise Nation resources
Webinar: Apply to research and development (R&D) tax schemes in 2023
R&D tax credits: What they are, how they help cash flow, and how to claim