One of the country’s leading research and development (R&D) tax experts has warned working capital issues caused by lengthy processing delays might prove terminal for dozens of businesses with genuine tax credit claims.
Tim Croft, national head of R&D at Azets, the UK top 10 accounting firm with an office at London Bridge, welcomed the news that eight people accused of conspiring to submit over 100 fraudulent claims have been arrested.
He also commended HMRC on its claim to have protected £46m of public money.
However, Mr Croft does not believe enough is being done to ensure genuine claimants are benefitting from the scheme, which is intended to encourage investment in innovation and contribute to economic growth.
He said: “We are pleased that long-awaited action has finally arrived, and appalled that any individual, company, or so-called advisor would seek to abuse a system designed to provoke innovation and accelerate growth.
“Nevertheless, it has taken far too long to reach this point, with hundreds of genuine claimants caught up in delays lasting months and suffering critical working capital issues.
“This disruption to cashflow coupled with the ongoing economic downturn could see dozens of bona fide R&D claimants needlessly losing their businesses due to lack of cash.
“This, despite them responding immediately to HMRC’s Fraud Investigation Service with all the information requested.”
Croft expressed hope that now HMRC has brought action against tax credit claims identified as fraudulent, it can return to swifter response times in support of businesses which desperately need the funding.
Amid speculation the relief scheme may be curtailed as part of the Autumn Statement on 17 November, he believes this would heighten the risk of innovative businesses running out of cash quickly.
He added, “HMRC has promised to step up its monitoring of claims for R&D tax relief fraud.
“We urge HMRC to also step up its oversight of the scheme overall and ensure a faster, smoother process for genuine claims.
“Businesses were encouraged to use the tax credit system and many hundreds did so in good faith.
“While it’s important HMRC continues to counter fraud and protect public money, it needs to find a way to do so in parallel with better delivery of the scheme.
“I hope we do not see a reduction in R&D tax relief in the Chancellor’s Autumn Budget. This is a vital source of funding for loss-making businesses who invest all their capital in innovation.”