Businesses that have claimed R&D tax credits could soon face intense scrutiny from HMRC, warns Opus Restructuring & Insolvency, as the government accelerates efforts to recover fraudulent or erroneous claims.
With the latest estimates suggesting £1.3bn of R&D tax credits were claimed incorrectly in 2021-22, HMRC has significantly increased compliance checks and is reallocating resources to investigate past claims.
Russell Payne, partner at Opus, explains: “Many SMEs have been misadvised into making R&D claims that simply don’t meet HMRC’s stringent criteria. For business owners looking to exit, either through sale or liquidation, failing to review these claims could lead to serious financial consequences. Directors must act now to ensure compliance before HMRC catches up with them.”
The implications extend beyond sellers. Buyers acquiring businesses must conduct enhanced due diligence, ensuring that any historical R&D claims are fully compliant to avoid inheriting unexpected tax liabilities.
In cases of concern, buyers may seek to reduce the purchase price, request an indemnity from the seller, or have funds held in escrow to cover potential liabilities. For sellers, the risk isn’t just financial. Delays in the sale process can occur while specialist, highly technical advice is sought to assess the validity of past R&D claims.
“HMRC is under pressure from the Treasury to clamp down on tax fraud, and R&D claims are firmly in their sights,” adds another partner at Opus, Allister Manson.
“The M&A market will be affected as buyers become more cautious and demand greater assurances over tax compliance. Sellers who have claimed R&D tax credits should seek professional advice as soon as possible to avoid jeopardising future transactions.”
The government’s approach mirrors historic tax investigations, such as those involving film investment schemes, which left businesses facing unexpected tax bills years after making their claims. With HMRC’s increased focus, companies that do not proactively address potential issues could find themselves subject to significant penalties.
Opus urges businesses to review their R&D tax claims immediately and, where necessary, seek specialist advice to ensure compliance and mitigate risks.
