CIOT has clash with HMRC’s R&D schem

COMMENT: Mark Smith, Partner – Innovation Incentives at Ayming UK
HMRC’s clampdown on the SME R&D scheme can’t continue as it is. Although it’s completely right to address the problems with error and fraud, the current approach has taken a regrettable turn.

The department tasked with handling the new volume approach has taken an aggressive stance and is questioning and scrutinising claims in a concerning manner. Part of the problem is the case handlers are clearly not well versed on the scheme or even with HMRC’s own rules and guidance for conducting an enquiry, meaning they are seeking to deny legitimate claims that shouldn’t cause any problems.

The reality is that HMRC have become difficult to work with, refusing to give companies and their advisors the time to discuss their claim. HMRC has long suffered a resourcing problem, and the clampdown is likely to make this worse as companies lodge numerous complaints and appeals.

Not only is the scrutiny creating stumbling blocks and payment delays, but it’s discouraging people to engage with the scheme. Of course, we want to see HMRC find ways to improve compliance, but this is entirely the wrong approach. The UK Government wants to increase R&D activity and encourage uptake of the scheme, not discourage it.

HMRC needs to find another way to iron out fraud in the scheme, which, in addition to more active engagement of the advisor community, could more effectively be solved by digitising applications and using tools like artificial intelligence to spot potentially fraudulent claims. There will inevitably be a pattern to inaccurate claims that an AI could be trained to spot.