HMRC pauses payment of certain R&D tax relief claims
Last week, HMRC issued a statement which outlined that a number of R&D tax credit payments had been paused whilst ‘irregular claims’ were being investigated. HMRC have also requested that claimants do not contact the R&D tax helpline/mailbox to chase their claims. Agents and companies have been asked to review their online account for updates on the status of claims rather than contacting HMRC.
HMRC have stated that the majority of R&D tax credit claims will not be affected but there is a growing consensus amongst many tax advisers that this is yet another sign of HMRC stepping up their efforts to combat fraud and abuse of the R&D tax relief system.
In recent years, HMRC have introduced major changes to how R&D tax relief is administered. The headline change was the re-introduction of a PAYE cap for payable tax credits, as part of abuse prevention methods. In addition, the recruitment of new personnel and an internal reorganisation at HMRC aimed to free up more resource for R&D enquiries. This, coupled with the inevitable recouping of Covid-19 support measure costs, suggests that R&D enquiries are likely to increase in the coming years. It is widely acknowledged that many claimant companies and their advisers inflate qualifying expenditure and, in many cases, claim on activities that do not meet the qualifying criteria for R&D tax relief. Further anti-abuse measures are expected in 2023 and recent budgets have hinted there may be a major overhaul of the entire system.
At YesTax, we welcome HMRC’s recent decision to pause payment on irregular claims. Any effort from HMRC which prevents abuse of the system should be encouraged. A strong message needs to be communicated to advisers who are often behind aggressive and non-compliant claims. In addition, claimant companies need to be aware that much of the advice given in the R&D tax sector is inaccurate, and in some cases, grossly negligent.
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