GovGrant urges action on innovation tax credit fraud but to keep the claim process simple
10th Jun 2019
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GovGrant CEO Luke Hamm has welcomed HMRC’s (HM Revenue & Customs) decision to crack down on abuse of the R&D tax relief system. GovGrant, which is a member of the HMRC Research and Development Consultative Committee, helps businesses claim millions each year for their innovation, including patents and inventions.
Mr Hamm said he hoped ministers would move quickly to protect the reputation of the tax system and force out unscrupulous agents in time for new rules on tax credit coming in April next year.
The rules state that the amount of payable tax credit that a qualifying loss-making business can receive through the relief in any one accounting period will be capped at three times the company’s total PAYE and NICs liability for that year.
The government is aiming to tighten the system after estimating that fraudulent attempts to claim the SME scheme payable tax credit costs the taxpayer £300 million.
Mr Hamm said: “Reputable companies have an important role to play in helping businesses take advantage of generous tax allowances available to companies who innovate, but HMRC is concerned that some companies cheat and we fear there are a growing number of agents willing to help game the system.”
“It is encouraging that the consultation wants feedback on which companies may be adversely affected, but we must protect companies who need to contract out this expertise to make their vision a reality.”
The consultation highlighted examples of frauds, including companies claiming for tax credits even though they had no R&D activity, or fake structures set up deliberately to claim R&D tax credit despite there being little or no employment or activity in the UK.
He said: “Abuse does need to be addressed through the current HMRC process, which could include potential further oversight of agents, but it is essential that we don’t create barriers for deserving companies to access the scheme by making the process more complex.”
Too much complexity will disbenefit innovative companies and have a significant negative impact on the UK’s Industrial Strategy. Innovation tax credits are one of the UK’s most successful policies for encouraging innovation. He said: “R&D tax relief is the most generous corporation tax relief currently available to business in the UK, especially for SMEs. They can recover up to a third of their qualifying R&D expenditure.”