HM Revenue & Customs’ accounts may have to be qualified for the fourth consecutive year because of the level of uncertainty over fraud and error in a key investment incentive, peers have been told.
Nicole Newbury, a compliance director at the tax authority, told a Lords committee that HMRC was “still facing a large number of spurious claims” under the multibillion-pound R&D tax credits scheme when asked if the government auditor might again refuse to sign off HMRC’s accounts.
Victoria Atkins, financial secretary to the Treasury, promised that the government was “getting a grip” on attacks on the scheme, which provides tax incentives for companies to invest in technology and innovation.
HMRC said the programme, considered a key industrial policy, was being targeted by criminal gangs using fake companies and “rogue agents” who encourage ineligible companies to claim.
Atkins said the Treasury was “very, very concerned” about its own evidence and reports in The Times of people “testing the system”. She said that, beyond HMRC stepping up checks and a series of changes that are due to be implemented next year, the government would consider more radical reforms, including possible regulation of the no-win, no-fee agents behind the vast majority of claims.
An investigation by this newspaper highlighted that the scheme has fallen into disrepute, with claims apparently submitted for the development of spurious projects such as vegan menus and blueberry croissant recipes. Losses to fraudsters and erroneous claims hit at least £469 million last year according to HMRC — although there is significant uncertainty over the estimate.
Tessa Robins, of HMRC, admitted the tax authority didn’t have an estimate for the proportion of losses attributable to fraudsters versus losses from “spurious” claims from real companies that do not qualify for the reliefs.
Baroness Noakes said that she was “horrified” that uncertainty over the scheme was having such a material impact on HMRC’s accounts.
In last week’s autumn statement the incentives were made less generous for small and medium-sized businesses and rebalanced towards larger firms.
The Treasury said last week that the generosity of the SME scheme had made it a target for fraud. Yesterday HMRC said the SME scheme provided worse value for money for taxpayers than relief aimed primarily at large companies. Industry bodies have criticised the move as a “blunt instrument”, saying genuine claimants were being punished for HMRC’s failure to police the scheme.
Newbury denied that virtually no claims were being checked, but told the Lords’ finance bill sub-committee that it was not practical to use more resources to tackle the problem because of the “sheer volume” of low-value claims, with about 60,000 worth less than £50,000 put in every year.
It’s fascinating how anybody in the business world has known about this for years. It’s been going on for years – companies cold calling and approaching promising free money.
I heard about it so much from other businesses, and people telling me to “get my claim in”, that I actually looked into it. Concluded it wasn’t really applicable for me (I’m quite risk adverse), but nothing about any of this report is remotely surprisng
Tories have turned the UK into Fraud Nation.
I’d love to see an accounting of the billions upon billions of pounds they have cost us over the last few years. All while claiming that these policies mean we are becoming a “science superpower” etc.
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Article contents:
*James Hurley, November 22 2022, The Times*
HM Revenue & Customs’ accounts may have to be qualified for the fourth consecutive year because of the level of uncertainty over fraud and error in a key investment incentive, peers have been told.
Nicole Newbury, a compliance director at the tax authority, told a Lords committee that HMRC was “still facing a large number of spurious claims” under the multibillion-pound R&D tax credits scheme when asked if the government auditor might again refuse to sign off HMRC’s accounts.
Victoria Atkins, financial secretary to the Treasury, promised that the government was “getting a grip” on attacks on the scheme, which provides tax incentives for companies to invest in technology and innovation.
HMRC said the programme, considered a key industrial policy, was being targeted by criminal gangs using fake companies and “rogue agents” who encourage ineligible companies to claim.
Atkins said the Treasury was “very, very concerned” about its own evidence and reports in The Times of people “testing the system”. She said that, beyond HMRC stepping up checks and a series of changes that are due to be implemented next year, the government would consider more radical reforms, including possible regulation of the no-win, no-fee agents behind the vast majority of claims.
An investigation by this newspaper highlighted that the scheme has fallen into disrepute, with claims apparently submitted for the development of spurious projects such as vegan menus and blueberry croissant recipes. Losses to fraudsters and erroneous claims hit at least £469 million last year according to HMRC — although there is significant uncertainty over the estimate.
Tessa Robins, of HMRC, admitted the tax authority didn’t have an estimate for the proportion of losses attributable to fraudsters versus losses from “spurious” claims from real companies that do not qualify for the reliefs.
Baroness Noakes said that she was “horrified” that uncertainty over the scheme was having such a material impact on HMRC’s accounts.
In last week’s autumn statement the incentives were made less generous for small and medium-sized businesses and rebalanced towards larger firms.
The Treasury said last week that the generosity of the SME scheme had made it a target for fraud. Yesterday HMRC said the SME scheme provided worse value for money for taxpayers than relief aimed primarily at large companies. Industry bodies have criticised the move as a “blunt instrument”, saying genuine claimants were being punished for HMRC’s failure to police the scheme.
Newbury denied that virtually no claims were being checked, but told the Lords’ finance bill sub-committee that it was not practical to use more resources to tackle the problem because of the “sheer volume” of low-value claims, with about 60,000 worth less than £50,000 put in every year.
It’s fascinating how anybody in the business world has known about this for years. It’s been going on for years – companies cold calling and approaching promising free money.
I heard about it so much from other businesses, and people telling me to “get my claim in”, that I actually looked into it. Concluded it wasn’t really applicable for me (I’m quite risk adverse), but nothing about any of this report is remotely surprisng
Tories have turned the UK into Fraud Nation.
I’d love to see an accounting of the billions upon billions of pounds they have cost us over the last few years. All while claiming that these policies mean we are becoming a “science superpower” etc.