Source · Select Committees · Public Accounts Committee
Recommendation 15
15
Given the uncertainties in HMRC’s current estimates of error and fraud in R&D relief claims,...
Conclusion
Given the uncertainties in HMRC’s current estimates of error and fraud in R&D relief claims, we asked HMRC what it was doing to improve its estimates. It told us that it was planning a random enquiry programme for R&D claims which will inform its estimate. We expressed our concerns that HMRC was not on top of the abuse problem. HMRC said that it had increased the resources it deployed on R&D compliance. Referring to Budget 2021 and a November 2021 HM Treasury report on R&D tax reliefs published 24 HMRC, National statistics, Research and Development Tax Credits Statistics: Updated 30 September 2021, section 10 and HM Treasury, R&D Tax Reliefs – Report, November 2021, para 1.6 25 C&AG’s Report, 4.32, 4.34–4.35, 4.37 26 Qq 133–135 HMRC Performance in 2020–21 13 the day before our evidence session, HMRC said that it had been advising Ministers about the extent to which it could control abuse operationally through its compliance response, and whether policy changes may be required to R&D reliefs. HM Treasury’s report set out the government’s plans to target abuse of R&D reliefs and improve compliance.27 Tax compliance
Government Response
Not Addressed
HM Government
Not Addressed
2.4 The government agrees with the Committee’s recommendation. 9 Target implementation date: Winter 2023 2.5 Activities are currently underway to address key error & fraud issues, including designing and implementing: • the package of R&D reform measures announced at Autumn Budget 2021 aimed at tackling abuse and improving compliance (by April 2023), including: • introducing a cross-cutting team of c50 FTE focused on abuse in partnership with HMRC’s Fraud Investigation Service • requiring all claims to be made digitally, with more detail, endorsed by a named senior officer • a programme of customer education to improve our upstream compliance programme • enhancements to HMRC’s risk profiling. 2.6 The Mandatory Random Enquiry Programme (MREP) results will be used to further inform the activities undertaken to address key error and fraud issues. This will subsequently enable HMRC to demonstrate that it is achieving a cost-effective error and fraud control environment. This control environment is defined within the NAO Error and Fraud Good Practice Guide as the environment that leads to the lowest level of error and fraud compatible with the policy intent. 2022-23 will be the first year a MREP-based estimate will be reported within HMRC’s Annual Report and Accounts.