Ian Davie
Senior Consultant
HMRC’s R&D Communication Forum (RDCF) was held on 16th September 2024. Although there were no major announcements, a few notable updates were shared, as outlined below.
This scheme allows loss making SME companies to claim a cash back at the higher rate of 14.5% (compared to the previous 10% under the old SME scheme)for companies with an R&D spend above 30%. Announced was a new grace period of 1 year, meaning an SME that has claimed ERIS, but dips below the threshold of 30% can still claim ERIS for that year. However, they will need to meet the 30% threshold again in subsequent years to remain eligible.
The portal for submitting all Technical Reports prior to filing accounts has been updated. This now accounts for the ERIS and new merged scheme, based on the RDEC. In an effort to minimise confusion, HMRC has officially rebranded the schemes as “old RDEC” and “new RDEC.”
Another change is the guidance for which projects need to be reported. Previously, up to 10 projects could be submitted for each scheme. Now, companies are required to submit the 10 highest value projects for each scheme instead.
Book an appointment to discuss any questions you have with our R&D expert.
Speak to usHMRC plans to introduce a regulatory framework for all tax advisors, not limited to R&D, following a consultation that concluded in May 2024. This looked at the scope, objectives, potential approaches, and how to improve agent registration.
The responses from the consultation are yet to be analysed, with a delay due to the election process and government change. The process will move forward once the next steps are determined.
HMRC are continuing with their Mandatory Random Enquiry Programme (MREP), which is an instrument they use to assess fraud and error in a number of tax regimes and schemes. Currently, HMRC is conducting its third MREP for 2023/24, with detailed statistics expected to be released later this year.
Following the first MREP in 2020/21 and the second MREP in 2021/22, the third MREP is the latest to give an idea of how the compliance measures and scheme changes are impacting fraud and error for the R&D schemes.
Initial estimates indicate a drop in % rates of error and fraud for all claims made from circa 17% to 7.8%. The majority occurring within the SME schemes, hence the focus on HMRC compliance checks for SME claims. Even here the rate of error and fraud has dropped from circa 25% to 14.6%. This has resulted in a drop in the total value of fraud and error, from a peak of £1.34bn in 2021/22 to an estimated £600m in 2023/24.
HMRC also noted a decrease in the number of R&D claim applications in early 2024/25 compared to the same period in 2023/24, though no specific figures were provided.
| Scheme | 2020/21 | 2021/22 | 2023/24 |
| Total | 16.7% | 17.6% | 7.8% |
| SME | 25% | 25.8% | 14.6% |
| RDEC | 3.6% | 4.6% | 3.6% |
| Value | £1.1Bn | £1.34Bn | £600m |
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As a result of the compliance checks, HMRC reported that the rate of error in claims that were adjusted or rejected was approximately 70-80%. This is based on 20% of all claims being subject to a compliance check, making the 70-80% adjustment rate quite significant. Considering that 90% of all R&D claims are supported by an agent (specialist R&D agent or accountant) then an adjustment of 70-80% is very high.
HMRC continue to exceed the target of processing 85% of RDTC claims within 40 days, and expect to maintain this performance even during the peak December/January period.
It has been announced that 5,000 new compliance workers will be recruited across HMRC, with an unspecified number allocated to R&D tax credits.
HMRC is structured into two teams:
HMRC reported receiving feedback from R&D agents and professional organisations (CIOT & ICAEW) highlighting a significant difference in quality and approach between the two teams. The WMBC team is noted for its more personalised approach and higher skill level. HMRC has acknowledged this feedback and is working across all areas to enhance various aspects, including caseworker expertise, the quality of correspondence, consistent application of penalties, and interactions with taxpayers. This area has faced considerable criticism, with many errors reported and a perception that not all caseworkers are adequately informed. Further improvements are needed to ensure that the integrity of the schemes is maintained.
To address these issues, a Compliance Action Plan is due to be released later this year aiming to address many of the failings.
If you’d like to speak to us regarding any of the September R&D Communication forum updates, contact us today.
Explore TBAT Innovation's latest insights on HMRC’s R&D statistics, highlighting key trends in R&D tax relief claims, compliance, and the measures introduced to reduce error and fraud. Learn how TBAT’s expertise supports businesses in navigating these changes and ensuring their R&D claims are compliant.
Like many R&D tax credit professionals and accountants, TBAT have conducted a number of compliance checks, supporting both our own claims and those of clients who sought assistance with claims prepared by others. In our latest article, we take you through how TBAT Innovation is managing these compliance checks.
Assists organisations in accessing research and development grant funding across a range of UK and EU schemes and industry sectors.
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