Options Under Consideration

The three main avenues for reducing error and fraud that are being consulted on are:

1. Introducing a Mandatory “assurance” check – that some (but not all) companies would have to receive seek and receive approval from HMRC before making an R&D claim. This would be similar to the current advanced assurance, but would be mandatory. It is stressed that this would be targeted at sectors of “high-risk” claims. What is meant by high-risk claims is not specified, but the consultation as a whole seems to imply that error and fraud is more prevalent in smaller claims and in some specific industries. (Our internal data would support the assertion that HMRC is clearly targeting certain SIC codes). It seems likely that mandatory pre-claim reviews would be targeted at smaller claims and/or those in certain industries.

2. Implementing a minimum expenditure threshold for R&D claims. What the minimum spend would be is not specified and is one of the items being consulted on, but the scheme’s original spend of £25k is mentioned. The consultation document implies that low spends could not realistically be pushing the boundaries of science and technology (a view not everyone might share!)

3. Voluntary Advanced Assurance – the consultation document highlights the low uptake of the current Advance Assurance scheme (80 applications per year), and is looking for ways of improving this. These could include expanding breadth of companies that can apply for it (currently set at those with 50 employees or less who have never made an R&D claim) or introducing a post-claim but pre-payment assurance that would essentially reassure a company that their claim isn’t going to reduced or removed in an enquiry. There is also mention of a paid-for advanced assurance, which would presumably be aimed at larger companies.

Agents

The document highlights the role of R&D agents, stating that some help companies get claims right and some abuse the scheme.

It also highlights that, as a result of the requirement for companies to supply additional information with their claim, R&D is an area where HMRC has extensive data on agents. There may therefore be an opportunity to use this data when designing the clearances, limiting the service for example to customers who use an agent who is registered with HMRC or a member of a recognised professional body.

Other Notes

• There is no mention of changing the scheme rates, nor of how any assurance would interact with pre-notifications or the AIF.

• The document cites HMRC’s enquiry rate as increasing from 10% in the tax year ending 2023 to 17% in the following year to 2024.

• HMRC currently has over 500 people working on R&D compliance, compared with around 100 people in 2020 to 2021.

• It is confirmed that there is currently a “Basic automated risk profile check” that occurs immediately after claim submission, as well as “past payment checks” that occur after claims have been paid out.

• For those interested in reading it, the full document is available here.

ABGi will, of course, be responding to the consultation. Should you have any comments or questions we would encourage you to do the same. You can contact us at info@abgi-uk.com with any feedback.