Research and Development (‘R&D’) Fraud

Research and Development (‘R&D’) is an essential component of modern-day business. It is a process through which companies invest in the development of new products, processes, or services that can help them stay ahead of the competition. However, there are instances where companies may try to take advantage of the R&D tax relief system by committing fraud. In recent years, there has been a significant rise in R&D fraud cases reported to the HM Revenue & Customs (‘HMRC’).

The R&D tax relief system was introduced in 2000 as a way to encourage innovation and investment in R&D. Companies that invest in R&D can claim tax relief on qualifying expenditure, which can significantly reduce their tax bill. However, the system has been subject to abuse, with some companies making false claims for R&D tax relief.

What types of R&D fraud are there?

The most common type of R&D fraud involves exaggerating the amount of R&D expenditure or claiming for activities that do not qualify as R&D. Companies may also claim for R&D activities that have already been carried out or for projects that have been abandoned. These fraudulent claims can result in significant losses to the Treasury and undermine the integrity of the R&D tax relief system.

HMRC has been taking steps to tackle R&D fraud, including increasing the level of scrutiny applied to R&D claims. Companies that make R&D claims are required to provide evidence to support their claims, and HMRC may carry out checks and audits to ensure that the claims are genuine. In some cases, HMRC may prosecute companies that make false claims for R&D tax relief.

In 2018, HMRC introduced new rules to combat R&D fraud. These rules require companies that make R&D claims to disclose the names of any third-party advisers who assisted with the claim. This is intended to increase transparency and deter companies from using unscrupulous advisers who may encourage them to make false claims.

HMRC has also established a specialist unit to investigate R&D fraud. This unit is made up of specialist investigators with expertise in identifying and investigating cases of R&D fraud. The unit has been successful in identifying and prosecuting several cases of R&D fraud, resulting in significant fines and penalties for the companies involved.

What can you do

It is essential for companies to ensure that their R&D claims are accurate and legitimate. Companies should seek professional advice and support when making R&D claims and ensure that they have robust systems in place to track and document their R&D activities. Failure to do so could result in significant financial losses, reputational damage, and even criminal prosecution.

How can Richardson Lissack help?

If you are being investigated or charged with an R&D fraud offence our team of expert lawyers can provide expert litigation and representation.  Our lawyers are available 24/7 to assist you and provide legal advice. Contact London 020 3753 5352 or Manchester 0161 834 7284. Alternatively, you can email info@richardsonlissack.co.uk