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R&D Tax Credits Update

R&D Tax Credits Update

HMRC have issues an update on the delay in processing R&D Tax Credit claims. While the recent activities of HMRC have been a huge frustration for many clients and agents who are submitting legitimate claims prepared on an ethical basis there has been a huge increase in the number of companies offering to prepare claims over the last two or three years. Many of these new entrants do not operate on the same ethical basis as firms regulated by professional bodies such as the CIOT or ICAEW, they are only interested in the fees not providing the best service to their clients. We have been involved in R&D Tax Credits since its introduction working with companies in a myriad of industries but we have never seen so many dubious claims as we have over the last couple of years. I have been asked many times over the last few years if R&D Tax Credits would be withdrawn to which I have answered ‘No, but I think there will be a clamp down soon’. While as I have said, this is very frustrating the majority of ethical agents have welcomed the long overdue market rationalisation to protect this vital and valuable tax relief.

  • Since April we have faced an increase of fraud within the RDTC relief. While some of this fraud is opportunistic, some is linked to organised criminal gangs. As you would expect, HMRC responded quickly by pausing all payments and by strengthening our systems accordingly.   
  • Our aim is to protect the R&D scheme from such attacks while minimising any delays or enquiries for legitimate claimants. However, in this instance, the nature of the attacks (alongside the fiscal risk to the Exchequer) meant we had to respond quickly and robustly by pausing all R&D payments on the 28th April 2022.   
  • Our operational response culminated with further risk assurance checks to react to the increased number of fraudulent claims. Since April 1st we have received over 8000 RDTC claims, which all need to go through our further scrutiny processes.   
  • We do recognise that these additional checks may cause delays to legitimate businesses and appreciate their patience as we work through these exceptional circumstances. We want to reassure legitimate claimants that we are working hard to expediate claims as soon as we can. 
  • While we are pleased that we could restart paying RDTC claims from the 10th May 2022, the nature of the additional operational checks
    (required to protect the R&D relief) means that it is not currently
    feasible to offer a 28 day payment turnaround for claims and we think the standard service level will need to be 40 days. We are working to recover from the recent pause in payments and expect to be processing 80% of claims within 40 days, by the end of August 2022. 
  • While we cannot go into the detail of our ongoing investigations and compliance activity, we do want to explain to tax agents that we have a duty to challenge irregular claims, requesting more information
    if we believe it is appropriate. We have already issued over 1000 letters to claimants which have been identified as high risk, challenging irregular claims. 
  • As soon as we have further news on our progress, we will
    let you know. With this in mind, we ask R&D claimants to bear with us and kindly ask them not to contact the R&D helpline/mailbox to chase their claims. We also ask you not to contact any HMRC official about a
    claim. Instead, agents should check the company’s online account to check the status of their claim.  
  • We hope that our recent activity reassures agents that we are committed to tackling abuse of the R&D relief scheme, ahead of the R&D reforms announced  previously at Autumn Budget 2021.