Fraud and error in research and development

The government is concerned about the effectiveness of the UK’s research and development (R&D) relief schemes and there has been heavy focus on this by both the Treasury and HMRC in the past couple of years. On 17 July 2023 HMRC published a report HMRC’s approach to research and development tax reliefs (tinyurl.com/hmrcapproachrandd) which contained a number of updated statistics on the amount of error and fraud it estimates occurs through R&D claims.

The headline figure £1.13bn is HMRC’s new estimate for error and fraud for 2020/21 – representing 16.7% of the total amount paid out to R&D claimants for the year. This figure is significantly higher than the previously published estimate of 3.6% for 2020-21 with HMRC’s latest estimate now based on ‘international best practice’ which includes detailed post-payment analysis by random enquiries into 500 R&D relief...