HMRC crackdown on R&D tax fraud

HMRC estimated that the level of error and fraud within Corporation Tax R&D reliefs in 2021-22 was £469 million. It’s not surprising that HMRC has been taking steps to tackle abuse and improve compliance.

Last spring the Government announced that it would be increasing compliance resource and activity. HMRC’s specialist R&D team focused on SME compliance has more than doubled in size in recent years.

We have seen a significant increase in the number of R&D claims being picked up for enquiry, particularly software-related claims. In some instances, these enquiries are being worked by HMRC’s Fraud Investigation Service.

This crackdown has led to businesses facing long delays in receiving R&D tax relief payments.

Nudge letters

Despite increased resources, HMRC simply cannot investigate every single claim and has recently turned to a ‘one-to-many’ approach in its fight against R&D tax fraud.

2,000 businesses were sent ‘nudge’ letters in January warning that they be subject to formal enquiries and rejected claims if their returns are found to be inaccurate. We suspect more letters will follow.

Recipients of a nudge letter should check their R&D claims as soon as possible, and if inaccuracies are identified, amendments to Company Tax Returns should be made. Professional advice is recommended.

Changes from 1st April 2023

HMRC has also set out new filing processes to tackle abuse. The changes apply from 1st April 2023.

• All claims are to be made digitally
• All claims are to be accompanied by additional information including a breakdown of the types of expenditure
• All claims are to be supported by a named officer of the company
• Any agents associated with the claim must be notified in the claim
• Companies need to let HMRC know in advance if they intend to make a claim

These changes will ensure that HMRC has information available in a digital format to risk assess claims, address claims being submitted by agents without the company’s knowledge or understanding and allow HMRC to spot the involvement of agents with a track record of facilitating spurious claims.

What should I do if I need help?

If you need help checking your previous claims, our team of highly experienced ex-HMRC inspectors would be happy to help you review your individual circumstances and give you specialist advice. We can deal with HMRC on your behalf, support you through the process and help you to put things right quickly and efficiently. Get in touch with our helpful team today.

If you have any questions about R&D claims, nudge letters, or have any tax issues in general, please get in touch on 0203 675 8122 or email Joe at joe.mcdermott@intaxltd.com.