Chris Knott
31 October '22

4 minute read

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Nicely timed for Halloween, The Times has certainly stirred the cauldron over this weekend by opening the closet and throwing some skeletons out of it!

Their first chilling article, on Friday last week, pulled no punches at all. It called out firms for “cashing in on questionable tax credits”. It specifically mentioned various activities that companies have made claims for, including:

  • Vegan menus;
  • A laundrette reducing washing machine temperatures;
  • Staff performance reviews;
  • Cocktail menus
  • Three advisors are mentioned by name! Not great given the title of the article.

A haunting quote seems to suggest that because claims have been allowed through before from industries (where in reality little qualifying R&D will have been done) then R&D relief is available to all. This, of course, completely ignores the fact that everyone knows HMRC haven’t had the capacity to enquire into large swathes of claims and so it’s pretty well accepted that most claims will not have been checked at all. So this doesn’t equate to a “mass sign off” by HMRC from those industries. Two wrongs don’t make a right!

The article quotes £469m as being lost to fraud last year alone under the scheme.

HMRC felt moved enough to comment, through its Twitter account:

HMRC ended by referencing again the reforms and changes coming in soon and how these will “help further reduce abuse.

Not content, the Times came back today and filled its trick or treat bucket some more! Essentially using the HMRC response above to dig more deeply into the arrests! Eight held over research & development tax credit ‘fraud conspiracy’ | Business | The Times

They then finished off the triple whammy with a final article highlighting the increase in scheme claim numbers and the new rules that are coming in next year. Huge cost to taxpayers of HMRC research & development initiative comes out in the wash | Business | The Times

As most people who have read anything I’ve written before will be well aware, I’ve called for some form of accreditation in the R&D advisory industry for a long time. Many of the decent advisors out there in the market are more than fed up with the extent to which the industry has been dragged through the mud. So I fully applaud The Times for shining a light on some this appalling abuse of the scheme, that we’ve all heard about for some time.

My only hope is that there isn’t any sort of pitchfork-type over-reaction from HMRC now that the monster has been pointed out. There is bound to be an element of embarrassment felt by them in terms of having their failings (in letting so much of this go through) laid bare. However, they’ve already mooted a few changes for April 2023 and beyond covered in previous articles and there is already the enquiry currently ongoing by the House of Lords Finance Bill Sub-Committee. So it’s definitely on radar to take a good look at things. Hopefully they listen and take into account the consultation responses to the above enquiry.

For my previous article on HMRC’s clampdown on fraud and my “Top 10 red flags” for spotting a rogue R&D advisor (and hence being able to avoid using them), see this earlier article.