HMRC is ramping up checks on research and development (R&D) tax credit claims to prevent the exploitation of the reliefs

This enhancement in checks will lead to a rise in HMRC’s standard processing duration. HMRC had notified previously that the payments will be delayed due to a surge of ‘irregular’ claims.The approximate overall amount of R&D tax credit claimed for the period ending in March 2020 is £7.4bn, a rise of 19% from the preceding year.

This correlates with £47.5bn of R&D expenditure, 15% more than the past year.For the vast number of claims, HMRC now intends to compensate the tax credit under 40 days, an increase from the original 28-day processing time period.The notification was circulated via the agents’ forum, with the organization expressing: ‘We appreciate agents’ and claimants’ understanding while we deal with these claims’.It has also stated that claimants should go through the following steps;

• to enable HMRC to expedite the payment procedure, make sure all items are filled on the R&D portion of the corporation tax return (CT600 form);
• submitting additional information to support the claim, such as the R&D report, will help HMRC process the claim quicker;
• adding extra details to support the claim, like the R&D report, will enable HMRC to process the claim faster;
• check updates on submitting the CT600 form on gov.uk;
• if a false, blown up, or deceitful claim is submitted then you might be responsible for a fine.

About two years ago the National Audit Office broadened the qualification under HMRC to incorporate R&D tax credit, based on the approximate level of fraud and oversight.The accounts depicted oversight and deceit across SMEs and RDEC schemes both as 3.6% of the amount of overall tax relief of R&D tax credits, or £311m in cash terms.At the beginning of 2022, accountancy firm UHY Hacker Young notified that there was a notable increase in no-affiliated firms providing R&D tax relief services.‘We have noticed a sudden growth in R&D advisers, who are usually not linked with any professional bodies such as the ICAEW, reaching out to SMEs, offering to make an R&D claim.

‘These individuals, most with no qualification in tax, exploit customers who are new to claiming for R&D tax credits, typically charging on a commission basis and are submitting various suspicious claims. The ‘no win/no fee’ scheme can enable many organizations to consider an R&D claim as cost-free and some are ready to accept questionable claims,’ UHY Hacker Young said.HMRC has allotted added resources to R&D tax relief compliance, with 100 new compliance officers, and is undertaking work to better comprehend the nature and scale of the error and fraud associated with the reliefs.