R&D Tax Credit Claims: Ensuring HMRC Compliance and Avoiding Error

HMRC’s latest annual report and accounts document an estimated level of error and fraud in the R&D tax relief schemes of 4.9% of the estimated cost of the reliefs. 2021-2022 is the third financial year these figures have been included in the accounts as there continues to be a significant increase in the cost and uptake of R&D Tax Credits. The rate is higher than the previous estimate, reflecting improvements in HMRC’s risk identification process.

The greatest level of error and fraud was found in the SME scheme at 7.3% whilst in the RDEC (Research & Development Expenditure Credit) scheme it was 1.1%

Whilst this data is estimated and does not differentiate between error and fraud, it is figures like these that led the government to announce reforms to R&D tax reliefs in the 2021 Autumn Budget. One of the aims of the proposed reforms is to target abuse and improve compliance and whilst all the new measures won’t be introduced until 2023, HMRC have already taken steps towards them.


New measures already implemented by HMRC to check compliance

In April 2022 HMRC identified a pattern of irregular claims which has now led to the implementation of new measures to tackle error and fraud. This includes establishing a threat risk assessment process for all R&D claims; additional payment identification and verification controls for all R&D payments; and accelerating the creation of HMRC’s R&D Anti Abuse Unit which was announced in the autumn budget.


Experience is key to compliance

As awareness of R&D Tax Credits is now very high and the number of claims continues to increase every year, so the number of R&D tax advisers has also significantly increased. Amongst the majority of reputable firms who always ensure their claims are HMRC compliant, there are unfortunately many new entrants to the industry lacking in the knowledge and experience to accurately prepare claims and this is where errors occur. Errors can also be made when claims are prepared in-house by staff or by generalist accountants who don’t employ or outsource the work to a specialist.


Checking Credentials

When choosing a firm to handle your R&D Tax Credit claims, it’s more important than ever to check their credentials and ensure they really do have the necessary skills and experience to guarantee your claims will be HMRC compliant and error-free.

For those businesses and advisers acting fraudulently, it’s hoped the new measures being put in place by HMRC will help weed them out.

R&D Funding Group has been preparing HMRC compliant R&D Tax Credit claims since its inception in 2016 but our experience goes back much further than this as our company directors, technical staff and analysts all have prior experience dating back to the early 2000’s when R&D Tax Credits were relatively new to the UK.

Our robust claim process ensures we always get it right first time, that claims are always maximised and are always HMRC compliant.

If you’d like to discuss how we can help with your claims, please contact us for a free and informal chat without any obligation.


HMRC’s annual report and accounts 2021-22 can be viewed here.