Rising Fraud R&D Claims Force HMRC To Act - TS Partners

[Liz Seyi]

R&D tax relief claims are taking longer to process, leading to longer waiting times for companies expecting the tax relief. HMRC has been forced to take action to reduce fraudulent claims.
Those processing the claims are asking for additional information to confirm the claims by small and medium-sized enterprises (SMEs) qualify for the tax credit. SME claims totalled £5.9 billion in the year to April and were completed in 30 days. However, earlier this month, HMRC informed tax advisers to prepare clients for a wait of up to two months.
R&D Tax credits reward innovation and creative solutions by allowing companies to offset qualifying costs against their tax bills.
Fraudulent claims have risen to 4.9% of all claims by SMEs in the year to April, costing roughly £469 million. This jump is a significant increase from the previous year’s 3.6%, costing £336 million. So, it comes as no surprise that HMRC has been trying to crack down on fraud.
What has HMRC done so far?
HMRC identified a pattern of irregular claims in April, so they paused payments to assess the situation before adding extra compliance checks. It is also building an anti-fraud team, announced in the autumn budget.
Heather Williams, an R&D relief specialist, talking with The Times, warned accountants and companies that the resulting delays could severely impact SMEs.
“If they’ve planned for people’s salaries and that money is not coming in for 60 days, that could be critical.
“We’ve got a [client with a] very large claim at the moment, nearly £1 million, where the money has been approved, but it’s not been paid. It could cause a business real financial difficulties.”
HMRC plans to make it a requirement for companies registering for R&D relief for the first time to notify their intentions in advance, no later than six months before their financial year-end. This new requirement will be implemented for accounting periods beginning on or after the 1st of April 2023.
Williams stated that the change will result in businesses standing to lose out.“I come across people all the time who don’t realise they have a claim … It does sometimes take an external person to sit down and go, ‘Do you realise that was R&D that you’ve just undertaken there?’ [The new rule] means they’re probably going to miss that first year’s claim in a lot of cases.”
She recommends business owners seek advice from a professional familiar with R&D tax credits instead of a generalist accountant.
“I probably see hundreds of technology claims, but if you were somebody who hasn’t, then you might not know that actually, a baseline has moved and that something a few years ago that would have been good technology for an R&D claim now is not”, said Williams.
One of the main culprits for HMRC slowing down claims was companies included non-eligible expenses.
“I’ve heard that’s one of the big triggers stopping claims. For example, rent is not an allowable cost, but some people have put that in claims and will get picked up, and it will hold them up. So they really need to check their claims carefully.”
HMRC understands that the additional rigorous checks are negatively impacting businesses.
An HMRC spokesperson said: “We’re making extra checks on R&D tax credits claims to protect the public purse due to an increase in concerning claims.
“We’re still processing the majority of R&D tax credits claims within 40 days and aim to return to our usual service as soon as we can.”
Need help with your R&D claim?
If you are considering an R&D tax credit claim, then you need help from the experts. TS Partners have a proven track record of successful claims and truly understands the scheme for small to large enterprises.
We have offices in Plymouth, Newton Abbot and Wellingtonbut help and advise clients across the country. Contact us today to see if you have an eligible claim, and we can help you submit a totally compliant claim.