Asked by: Michael Wheeler (Labour - Worsley and Eccles)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what steps her Department is taking to (a) reduce the time taken to (i) investigate and (ii) review research and development tax credit claims and (b) support small businesses to access tax relief schemes available to them.
Answered by James Murray - Exchequer Secretary (HM Treasury)
When HMRC receives an R&D relief claim, it goes through a risk assessment process. New additional information requirements mean HMRC can more accurately identify claims that may not be compliant and reduce the number of valid claims being picked for a compliance check.
The length of a compliance check will depend however on a range of factors, including the complexity of the claim and customer engagement. At Autumn Budget, HMRC published the Approach to Research and Development Tax Reliefs for 2023 to 2024, which shows that the average time to complete a compliance check for 2023-24 was 246 days, down from 269 days in 2022-23.
HMRC processed 92% of R&D claims within 40 days in 2023 to 2024. This is above HMRC’s published customer service aim to process 85% of claims within 40 days of receipt. 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.
Small businesses are vital to high streets and communities, and essential to the success of the government’s growth mission. The Government recognises the important role tax reliefs, including the R&D reliefs, play in strengthening small businesses’ ability to invest and grow.
Whilst it is right that HMRC is taking action to address error and fraud, the government is committed to responding to stakeholder feedback and improving administration to ensure the R&D reliefs continue to support our most innovative businesses.