HMRC has halted the payment of research and development (R&D) tax credits while it investigates irregularities in claims for the relief
HMRC contacted accountancy firms on Monday informing them of the decision to pause the payment of research and development tax credits as it investigates what it refers to as ‘irregular claims’ for the tax credit payments.
In a message to firms, HMRC stated that the move may cause delays to its processing times for other R&D tax credit claims, the tax authority said this will ‘ensure they prevent abuse of the relief’.
The tax authority stated that the majority of R&D tax credit claims are ‘genuine and will not be affected’.
HMRC has also requested that claimants do not contact the R&D helpline/mailbox to chase their claims. Instead, it has asked agents and companies to review their online account for updates on the status of claims.
HMRC confirmed that it will continue to issue the regular Monday agent email to update claimants on the processing times but ‘hopes to share more information’ with agents next week.
In order to process payments more quickly, HMRC has asked people to ‘ensure’ that they have completed all entries on the R&D section of the corporation tax return (CT600 form) adding that ‘submitting additional information to support any claim, such as an R&D report, will also help HMRC to process claims quicker’.
The tax authority also issued the reminder that if a claim that is incorrect, inflated, or fraudulent is submitted then a penalty could be issued.
A HMRC spokesperson said: ‘We have paused some research & development tax credit (RDTC) payments while we investigate some irregular claims.
‘The majority of R&D relief claims are unaffected but there will be some delays to our usual processing times. This is to ensure we prevent abuse of the relief.’
In December, accountancy firm Azets issued a warning to SMEs about rogue R&D advisers who were targeting small businesses and making inappropriate claims.
The firm’s analysis of HMRC’s most recent annual report found that the monetary value of fraudulent R&D claims in 2021 was £303m, which was up from £271m in the previous year.
The firm stated that it expected HMRC to tighten its controls on the relief after the Chancellor announced reforms of the R&D tax credits announced in the Autumn Budget 2021 which are to come into effect in April 2023.
The announced reforms aimed to support modern research methods by expanding qualifying expenditure to include data and cloud costs, refocus support towards innovation in the UK and a raft of measures to target abuse and improve compliance.