Oversight of R&D tax credits requires a rethink

It has been a tumultuous year for research and development (R&D) tax. A notable gap between political rhetoric and reality resulted in widespread confusion over what constitutes R&D as ambitions of making Britain a ‘science superpower’ and the ‘next Silicon Valley’ were undercut by hasty and unclear changes to the funding scheme.

The proposed changes were well-intentioned. No one rejects the fact that error and fraud creeping into the scheme must be appropriately dealt with especially with estimates suggesting that these types of claims cost taxpayers £1.2bn in 2021-22.

However the reality is that these fraudulent claims only make up a small proportion of all submissions and the ensuing confusion since the changes were announced has affected legitimate claimants. Research published in Ayming’s 2024 Innovation Barometer found that 18% of businesses will not be claiming because they are no longer sure of what activity is...