Earlier in 2022, HMRC announced that it was suspending payments of R&D tax credits while it investigated some claims. It has now released details of a new campaign to fight fraudulent claims.

R&D tax reliefs are a generous collection of corporation tax breaks that incentivise innovation. At the most basic level, R&D offers an enhanced deduction for qualifying expenditure, reducing. However, the relief for small and medium enterprises can be even better. Where the claimant company is loss making, part of the loss (the surrenderable loss) can be exchanged for a payable credit, equal to 14.5% of the loss surrendered. Unfortunately, the generous nature of this credit has attracted fraudsters. These “advisors” submit claims on behalf of companies, taking a share of the payable credit on a “no win, no fee” basis. As with many claims that are self-submitted, HMRC often makes a payment before asking questions, clawing back the amount (with penalties) if it is found to lack merit. Unfortunately, many fraudsters ask the company to permit HMRC to pay the money directly to them, meaning that when the demand for repayment comes through, the company is out of pocket.

As with all these types of fraud, you should exercise caution if approached by a third-party making claims that sound too good to be true. It may well be that there are genuine R&D costs being incurred, but it’s unlikely that you’d be totally unaware of these – even if you know little to nothing about R&D tax credits. HMRC is writing to companies where the claim appears to be spurious, inviting them to contact the department with further information, and reserving the right to open a criminal investigation.

This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.