With HMRC raising red flags about potentially fraudulent R&D claims, Katie Pearce, head of claim quality at EmpowerRD, explains how to ensure the initial paperwork is up to scratch and passes the inspectors
While increased compliance checks have significantly reduced the amount of tax lost due to error and fraud, it is unsurprising that intense scrutiny remains with errors in research and development (R&D) relief claims amounting to £441m in 2023-24 alone, according to HMRC figures.
In total, 20% of all R&D claims received an enquiry into their legitimacy in 2024, which is five times more than in 2022.
Meanwhile, HMRC’s introduction of an anti-abuse unit, which saw it add 300 staff to the small business compliance team, means it now has around 500 staff focused on identifying errors and fraud in the scheme.
This clamp down on fraud and error, plus the introduction of the additional information form (AIF) - which requires companies to provide detailed breakdowns of their R&D projects, costs and justifications upfront - and the mandatory random enquiry programme (MREP), means that the chance of a business receiving an enquiry is now higher than ever.
