HMRC have recently confirmed that organised criminal gangs (OCGs) have been exploiting the valuable Research & Development tax credit relief.
What is the issue?
In a plot you might expect from Line of Duty or Peaky Blinders, mass fraud by OCGs targeting the R&D tax incentive has now been unearthed by HMRC.
This was the main cause of the delay in R&D processing times that has occurred since April, as well as opportunistic fraud by some companies and advisors, resulting in the usual 28 day turnaround being extended to 40 days.
HMRC’s Fraud Investigation Service has issued over 1000 letters to companies that they suspect of irregular claims, which could result in tribunal or prosecution.
The original recruitment by HMRC of 100 additional R&D inspectors earlier in the year appears to have been the pre-curser to the discovery of the fraud.
Unfortunately, the R&D market place has become a breeding ground for unscrupulous claims and advisors, some operating in a similar style to PPI sales people.
The way forward
At the R&D Consultation Forum meeting in July, HMRC confirmed that they aim to return to the target turnaround time of 28 days after this current phase of increased scrutiny.
So far, there is no indication of when this will occur and we expect the increased scrutiny may continue until the consultation on R&D is complete, which we welcome to reduce the chances of fraud and unscrupulous claims.
Agents need to exercise, and be held to the highest standards of ethical and professional conduct to ensure correct claims are submitted to HMRC.
R&D tax relief could help UK businesses manage the longer-term impacts of COVID-19 and Brexit, as well as other major issues such as climate change and Dafferns wholeheartedly support a more robust system to allow successful legitimate claims to benefit businesses.
It is time to root out the Peaky Blinders caps, act like AC12 in Line of Duty and only claim legitimate R&D tax relief via experts adhering to the highest codes of professional conduct.
Please do not hesitate to contact the expert R&D tax team at Dafferns to review your position. The Dafferns Tax Team will publish updates on the R&D tax relief consultation as soon as available.