R&D plans not the way to tackle fraud says a concerned ATT

In today’s Autumn Statement speech, the Chancellor announced that, in response to concerns over fraud in the R&D relief schemes, the levels of relief available under the Small and Medium-sized Enterprises (SME) scheme would be reduced.¹

Senga Prior, Chair of ATT’s Technical Steering Group, said:

“We share the Government’s concerns over abuse of the R&D relief schemes and strongly support efforts to crack down on such abuse of the tax system and improve compliance. But we do not believe that restricting the level of relief available to all SMEs is a proportionate way to achieve this.

“The smallest and newest businesses which are often most in need of the support offered by the R&D scheme stand to lose out under these plans, even though they are carrying out genuine R&D.  We worry that reducing the relief available to these businesses could affect their ability to grow and fund and carry out new research.

“We believe that the best approach to tackle abuse of R&D relief is to do so head on by targeting the minority of advisers behind incorrect or spurious R&D claims. This will prove more effective than simply reducing the relief available to genuine claimants.”

At the same time as announcing cuts to SME R&D relief, the Chancellor announced that the relief available to larger companies under the Research and Development Expenditure Credit (RDEC) scheme would increase. Steps will also be taken towards having a single RDEC scheme for companies of all sizes.²

Senga Prior said:

“Although SMEs can currently choose to claim under the RDEC scheme instead, it is much more complicated. By contrast, the simple to understand enhanced deduction and repayable credit offered by the SME scheme is of real value to SMEs.

“We are therefore disappointed that the Government is planning to bring all SMEs into an RDEC-like scheme in time. But we are encouraged to hear plans to consult on the design of this scheme and would encourage them to ensure the final result is something which is as straightforward as possible to encourage genuine SME claimants to apply.”

Notes for editors



In his speech the Chancellor said “I have also heard concerning reports of abuse and fraud in R&D tax relief for SMEs. So, I have decided today to cut the deduction rate for the SME scheme to 86 per cent and the credit rate to 10 per cent but increase the rate of the separate R&D expenditure credit from 13 per cent to 20 per cent”



Currently, the SME scheme provides a deduction rate of 130% and a credit rate of 14.5%.



See paragraph 5.52 of the Autumn Statement document