Research: Tax Allowances
The question
To ask the Chancellor of the Exchequer, if she will make an estimate of the cost to the public purse of (a) fraud and (b) error related to R&D tax relief in each year since 2015.
Answered by James Murray
In October 2024, HMRC released operational data in the Approach to Research & Development Tax Reliefs 2023-2024 publication. This includes data from 2022-2023 and 2023-2024 on the number of R&D enquiries, the proportion of claims requiring adjustment and data on appeals. This publication represents the most comprehensive data on R&D compliance activity and is not available for previous years.
This publication also included customer service data on processing times and the average time to complete a compliance check. HMRC processed 92% of claims within 40 days in 2023-2024. Processing means paying the claim, making contact to request further information, or refusing the claim, and, for claims identified as high-risk, starting an appropriately targeted compliance check.
The table below provides final and illustrative estimates of the cost of error and fraud in the R&D tax reliefs since 2020-2021.
| Final estimates 2020-2021 (£m) | Final estimates 2021-2022 (£m) | Illustrative estimate 2022-2023 (£m) | Illustrative estimate 2023-2024 (£m) |
SME scheme | 1,038 | 1,203 | 1,003 | 475 |
RDEC scheme | 90 | 134 | 48 | 125 |
Overall | 1,127 | 1,337 | 1,050 | 601 |
The Mandatory Random Enquiry Programme approach introduced for small and medium sized enterprises represents good practice in the measurement of error and fraud, and involves a detailed inspection of a representative sample of claims filed. These estimates are published in HMRC Annual reports and Accounts and previous reports can be found at gov.uk at: HMRC’s Annual reports and Accounts.
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