Letter to House of Lords provides further insight into R&D anti-fraud measures from HMRC

In a letter to the House of Lords Finance Bill Sub-Committee, Victoria Atkins MP explains why R&D anti-fraud measures have been taken so seriously by HMRC and outlines several preventative measures they’ve taken.

This follows on from the new R&D reforms announced in the Autumn Statement.

Here are five of the most important facts:

1. The specialist R&D team focused on SME scheme compliance has recently doubled. HMRC now has 245 full-time equivalents (FTE) employees working on checking R&D tax claims and other reliefs, including Creative Industries and Venture Capital.

2. 84% of SME R&D enquiries determined to be inaccurate: So far, in 2022-23, claims are determined to be inaccurate in 84% of enquiry cases in the SME Scheme.

3. The average amount over-claimed by these inaccurate “enquired” SME R&D claims is £128,000. 

4. Following reforms announced in Autumn Statement 22, the amount claimed under the RDEC scheme is now estimated to exceed the SME scheme by 2024/25. It’s expected that the value of relief provided by the RDEC scheme will increase to £3.8bn, while the SME scheme will drop to £3.7bn. (For comparison’s sake, in 20/21 the SME scheme’s relief was £4.2bn; the RDEC scheme’s relief was £2.6bn.)

5. Before the most recent R&D reforms, the SME scheme was estimated to pay out twice as much as the RDEC scheme by 2024/25.  It was expected that the SME scheme would increase to deliver £5.6bn of relief, and the RDEC scheme would stay at £2.6bn.

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