The Chartered Institute of Taxation has expressed concerns that HMRC’s efforts to crack down on bogus research and development (R&D) tax relief claims is resulting in legitimate claims by small and medium-sized enterprises (SMEs) being rejected, with the increased bureaucracy leading to ‘a breakdown of goodwill and trust between HMRC and taxpayers and their agents’.
In a letter to the director of wealthy and mid-sized business compliance at HMRC, the CIOT says the rigid and uncompromising ‘volume compliance’ approach taken from the end of 2022 does not suit the technical nature of the relief, with frequent challenge and standardised letters providing little or no opportunity for businesses and their advisers to explain their R&D activity.
Ellen Milner, CIOT director of public policy, said: ‘Abuse of R&D relief is a substantial problem, but in its efforts to tackle it HMRC needs to be careful not to throw the baby out with the bath water.