HMRC

Big businesses suspected to have overclaimed £725m in R&D tax relief

A particular area of focus for HMRC is dubious R&D tax relief claims submitted by unregulated agents

HMRC suspects the UK’s largest companies of owing £725m in underpaid tax in the last year because of over-claiming R&D tax relief, according to national accountancy group UHY Hacker Young.

It said this represents a 16% jump on the £623m in tax HMRC suspected was underpaid in the previous year.

Whilst HMRC has increased its estimate of overclaimed R&D tax credits by big businesses, UHY Hacker Young said it is also “particularly concerned” at R&D claims made by medium sized and smaller businesses but cannot yet put a figure on it.

A particular area of focus for HMRC is dubious R&D tax relief claims submitted by unregulated agents as these ‘boutique’ firms often have no regulated accountancy or tax professionals.

UHY Hacker Young said it believes HMRC is concerned that these agents, who often work on a ‘no win/no fee’ basis, are “encouraging companies to claim far more tax relief they are entitled to”. To be truly eligible for R&D tax credits, firms must have made a genuine advance in science or technology.

Kevin Edwards, Tax partner at UHY Hacker Young, said: “HMRC now has a laser focus on what it sees as spurious R&D tax relief claims. They regard some of the claims submitted with the assistance of unregulated agents as very questionable at best.

“The correct approach to R&D claims is to make sure businesses receive accurate advice about how much of their R&D activity – if any – is eligible for tax relief. It is not to encourage clients to push the boundaries with speculative claims.”

He added: “Submitting an R&D claim is going to get a lot trickier as HMRC looks to clamp down on error and fraud.

“Before submitting an R&D claim, it is always better to seek professional tax advice from a qualified accountant. Otherwise, a business is opening itself up to a time-consuming and costly HMRC investigation and may have to pay back significant amounts of tax.”

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