HM Revenue & Customs (HMRC) has introduced a new disclosure service for companies that inadvertently overstated research and development (R&D) tax relief and failed to amend their returns.
The move underscores the Government’s intensified crackdown on abuse of the scheme, which is said to have cost the Treasury more than £1 billion in lost revenue.
The initiative targets companies that may have overestimated their R&D spending in good faith, not those that intentionally commit fraud. It follows an increase in HMRC investigations into questionable R&D claims, with the tax under review reaching £641 million this year, according to the department’s annual report.
R&D tax credits, generous by design, encourage companies to invest in innovative projects. However, this same generosity has also attracted fraudulent activity and organized criminal efforts to exploit it, costing the Treasury an estimated £1 in every £4 of benefits in 2020-21.
Dawn Register, a tax dispute resolution partner at BDO, said: “There are also other disclosure methods available to companies looking to modernize their tax affairs. We have seen many unscrupulous ‘claims’ agents in the R&D market in recent years. If a company now realizes While its previous claims were “speculative,” voluntary disclosure is certainly the best course of action.