The Institute of Chartered Accountants in England and Wales (ICAEW) has warned that genuine research and development (R&D) businesses could be impacted by government proposals to combat tax relief abuse.
In its consultation ‘preventing abuse of the R&D tax relief for SMEs’, the government stated that it aims to reduce the number of fraudulent claims for R&D relief and specifically target individuals exploiting the tax repayment available.
The proposed measures will limit claims for a payable R&D credit by reference to a claimant’s Pay as You Earn (PAYE) liabilities.
The ICAEW stated that it is concerned that some of the proposed measures may increase the administrative burdens on businesses that comply, and potentially preclude genuine claims.
The ICAEW said it welcomes HMRC’s proposal that claims under £20,000 will not be affected by the R&D credit cap. According to the ICAEW, this will help to ‘mitigate the impact of the proposals significantly’.
However, the ICAEW stressed that it is unclear how this measure will prevent larger volumes of lower value fraudulent claims.
HMRC’s consultation on the scope of R&D expenditure closes on 13 October.