Dr Brian Williamson

Our role in society is to work with lawmakers, not against them. This principle is particularly relevant when it comes to the Research and Development (R&D) tax credit system, where collaboration between businesses, providers, and HMRC is essential for maintaining the integrity of the scheme.

It may seem unusual for a former CEO of a provider, someone who submitted R&D tax credit claims for over a decade and had more than a few “robust discussions” with HMRC, to now be advocating for its position.

But the reality is that providers supporting R&D tax credit claims have a duty to ensure the scheme is used correctly. This means not only helping businesses access the relief they deserve but also preventing misuse that could undermine the entire system.

Recent reports have highlighted HMRC’s intensified efforts to combat fraud and error within the R&D tax credit system. Notably, HMRC conducted 648 dawn raids last year, up from 623 the previous year, as part of its campaign against tax evasion.

While these actions underscore HMRC’s commitment to safeguarding public funds, they also reflect the pressing need for all stakeholders to uphold the scheme’s integrity.

To put it into perspective, consider this analogy: should we blame the police for the rise of scammers, or should we work alongside them to prevent fraud?

Just as law enforcement cannot be solely responsible for stopping every crime, HMRC cannot bear the entire burden of safeguarding the R&D tax credit system. The responsibility must be shared among all parties involved: government agencies, providers, and claimants alike.

One of the key issues is how the R&D tax credit scheme was marketed as “free money from HMRC,” leading to opportunistic claims from entities that had little to do with true innovation.

For instance, Premier League football clubs, including Chelsea and Nottingham Forest, have claimed millions in public funds through the R&D tax relief scheme, which is intended for genuine advancements in science and technology. Such cases raise questions about how the system is being applied and where the innovation lies.

This brings us to a crucial question: do we take responsibility for our own actions? If a company submits a dubious claim - such as developing an “innovative” way to plant a hedge in the rain - should it be held accountable?

The answer is yes. Equally, the provider facilitating such a claim should have the professional integrity to reject it. Both parties have an obligation to ensure the system is used for its intended purpose: supporting genuine innovation, not exploiting loopholes for financial gain.

One report highlights how, after years of inaction, HMRC suddenly became overzealous in its compliance efforts. This shift resulted in legitimate claims being rejected and created uncertainty for genuine innovators. Such an over-correction illustrates the difficulty of striking a balance between fraud prevention and ensuring businesses can still access the support they need.

While tightening compliance is necessary, an excessively rigid approach risks discouraging the very innovation the scheme was designed to support. The challenge lies in implementing fair, consistent, and transparent regulations that effectively deter fraudulent claims without stifling legitimate ones.

For the R&D tax credit system to remain sustainable, all stakeholders must play their part. This means more than just following the rules; it requires actively promoting responsible practices within the industry.

Providers must educate their clients on the spirit of the law, not just the letter, and implement rigorous internal checks to ensure only valid claims are submitted.

Creating a culture of honesty and integrity is crucial. By respecting the true purpose of the incentives, we can protect the system from abuse while ensuring that businesses engaged in meaningful innovation receive the support they deserve.

If we want to maintain a fair and robust R&D tax credit system, it cannot be a battle between HMRC and providers. Instead, it must be a joint effort, one that encourages ethical behaviour, safeguards public funds, and ultimately supports the innovators who drive progress.