HMRC ramp up scrutiny on suspected abuse of Research & Development tax relief

HMRC are ramping up scrutiny on suspected abuse of the Research & Development (R&D) tax relief, following a report detailing what the Government has deemed an ‘unacceptable’ level of non-compliance. Small and medium businesses and their tax agents are coming under particular scrutiny due to higher levels of inaccurate claims.

New data from HMRC shows that R&D tax relief claims more than doubled between 2016 and 2021, and around half of these claims were found to be inaccurate, containing either errors or false information.

The Government has been introducing new initiatives every year since 2021 to tackle R&D tax relief abuses and errors. Over the past three years, they’ve doubled the number of HMRC staff working on R&D tax relief compliance and have created a new dedicated anti-abuse unit, resulting in multiple arrests.

New policy measures have also been introduced to tackle the issue. All claims are now required to be made digitally and with additional information to target higher-risk claims.

The report identifies tax agents as valuable in making sure their clients submit valid claims. However, measures have also been introduced to target agents suspected of misconduct, such as requiring the information of any agent associated with a claim and limiting agents’ abilities to facilitate claims.

Our specialist tax team can identify if you qualify for this relief and help you make sure that any R&D claims you make are fully compliant with HMRC regulations. You can read more about Research & Development relief in our brochure here.

We also offer our clients the opportunity to protect themselves against the cost of most tax investigations by subscribing to our Tax Enquiry Protection Service. To find out more, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Ben Greves