HM Revenue & Customs (HMRC) has introduced a new disclosure service for companies that have inadvertently claimed too much research and development (R&D) tax credit and failed to amend their returns.
The move underlines the government’s stepped-up crackdown on abuse of the scheme, which is said to have cost the Treasury more than £1 billion in lost revenue.
The initiative is aimed at companies that have overestimated their R&D expenditure in good faith, rather than at companies that deliberately commit fraud. It follows a wave of HMRC investigations into questionable R&D claims, with the tax investigated this year amounting to £641 million, according to the department’s annual report.
The R&D tax credits are generous in design and encourage companies to invest in innovative projects. However, this same largesse has also attracted fraudulent activity and organized criminal efforts to exploit it, costing the Treasury an estimated £1 in every £4 of aid in 2020-21.
Dawn Register, a tax dispute resolution partner at BDO, said: “There are also other disclosure routes available for companies looking to bring their tax affairs up to date. We have seen many unscrupulous ‘claims agents’ in the R&D market in recent years. If a company now realizes that its past claims were ‘speculative’, voluntary disclosure is certainly the best course of action.”