Source · Select Committees · Public Accounts Committee
Recommendation 16
16
Accepted
HMRC introduced new measures and significantly increased compliance checks to combat R&D tax relief abuse.
Conclusion
HMRC has introduced a number of changes in response to the high levels of abuse. Since August 2023 HMRC requires companies to make all claims digitally, with more detail and endorsed by a named senior officer.57 It told us it is no longer paying claims directly to tax agents, and it now requires companies to disclose the identity of agents involved in the claim. It said that these changes should help fewer genuine claimants be subjected to HMRC’s compliance approach. HMRC has increased the number of compliance checks for research and development tax relief claims, now checking over 20% of claims compared with around 1% previously.58 HMRC told us that its increased compliance work has raised an estimated £250 million in 2022–23, but it has not estimated the impact of the new policy measures it has introduced.59
Government Response Summary
The government agrees with the committee's observation and has a target implementation date of Summer 2024 for various measures to combat R&D tax relief abuse, including new electronic claim requirements, increased compliance staffing, an Anti-Abuse Unit, and an R&D Disclosure Facility launching in Spring 2024.
Government Response
Accepted
HM Government
Accepted
5.1 The government agrees with the Committee’s recommendation. Target implementation date: Summer 2024 5.2 HMRC seeks to recover research and development (R&D) tax relief where it was not claimed in accordance with the law. All claims go through a risk screening process; new requirements to submit claims electronically and provide additional information will enable HMRC to risk assess large volumes of claims in an automated way and target interventions on higher-risk claims. 5.3 HMRC opens enquiries within legislative time limits. In the majority of cases, adjustments for incorrect R&D claims will be limited to claims investigated within the normal time limit of 12 months from the date the claim is submitted. However, HMRC does consider raising assessments outside of this normal time limit where relevant legislative conditions are met, including where there is evidence of deliberate non-compliance. Where there is evidence of deliberate non-compliance HMRC can look back up to 20 years to address this. 5.4 HMRC has increased its resources addressing non-compliance in R&D. Currently over 500 people work on R&D compliance, compared with around 100 in 2020-21. HMRC has also created an Anti-Abuse Unit (AAU), undertaking compliance activity where there is suspected abuse of the relief. This sits alongside work done by HMRC’s Fraud Investigation Service, where HMRC suspects criminality. 5.5 In spring 2024, the HMRC R&D Disclosure Facility will go live on GOV.UK, enabling customers or agents to inform HMRC if they may have overclaimed, or claimed in error and are out of time to amend their tax return. This will give customers the opportunity to come forward and put things right themselves rather than awaiting HMRC intervention.