Data acquired under the Freedom of Information Act by accountancy firm Price Bailey reveals that HMRC’s Fraud Investigation Service amended 2,100 R&D tax relief claims in 2022 and 2023 using its powers to correct corporate tax returns under FA 1998 Sch 18. The figures suggest that over 73% of claims that had been queried by FIS were subsequently amended.
The firm questions whether this represents an over-reach of HMRC’s power to amend returns under Sch 18 para 16 which, strictly, is limited to the correction of ‘obvious errors or omissions’ and ‘anything else in the return that the officer has reason to believe is incorrect in the light of information available to the officer’.
Gemma Thake, Tax Partner at Price Bailey, commented: ‘HMRC is only supposed to use its powers to amend tax returns in very specific and limited circumstances. They must be simple and straightforward corrections where HMRC has specific information. What they cannot do is make a blanket determination about a claim based on the sector of the claimant, for example, which seems to be what has happened in many cases.
‘Whilst there is common acceptance that fraudulent claims should be challenged, HMRC’s sweeping approach may not result in the right outcome in all cases. Many claimants who have had their returns amended by HMRC are understandably scared and are wondering whether they should simply abandon their claims. Challenging HMRC’s decision when it seems to have made up its mind about fraud is likely to be too intimidating for many.’
Andrew Park, Tax Investigations Partner at the firm, said: ‘These aren’t so much nudge letters as hard shove letters. The way these letters are framed suggests HMRC is presenting claimants with a choice – accept rejection of the claim and walk away or risk possible criminal investigation.
‘By getting the Fraud Investigation Service to put its name on these letters, HMRC is clearly trying to strike fear into taxpayers in the hope that they will back down. HMRC is accusing claimants of fraud without bothering to open formal enquiries. It’s deploying these scare tactics to panic taxpayers into accepting their amendments.’
One point to consider for companies whose claims have been rejected under FA 1998 Sch 18 para 16 is to bear in mind the option open to them to amend the return to reject HMRC’s correction (sub-para (4)), having regard to the time limits in para 15.
Data acquired under the Freedom of Information Act by accountancy firm Price Bailey reveals that HMRC’s Fraud Investigation Service amended 2,100 R&D tax relief claims in 2022 and 2023 using its powers to correct corporate tax returns under FA 1998 Sch 18. The figures suggest that over 73% of claims that had been queried by FIS were subsequently amended.
The firm questions whether this represents an over-reach of HMRC’s power to amend returns under Sch 18 para 16 which, strictly, is limited to the correction of ‘obvious errors or omissions’ and ‘anything else in the return that the officer has reason to believe is incorrect in the light of information available to the officer’.
Gemma Thake, Tax Partner at Price Bailey, commented: ‘HMRC is only supposed to use its powers to amend tax returns in very specific and limited circumstances. They must be simple and straightforward corrections where HMRC has specific information. What they cannot do is make a blanket determination about a claim based on the sector of the claimant, for example, which seems to be what has happened in many cases.
‘Whilst there is common acceptance that fraudulent claims should be challenged, HMRC’s sweeping approach may not result in the right outcome in all cases. Many claimants who have had their returns amended by HMRC are understandably scared and are wondering whether they should simply abandon their claims. Challenging HMRC’s decision when it seems to have made up its mind about fraud is likely to be too intimidating for many.’
Andrew Park, Tax Investigations Partner at the firm, said: ‘These aren’t so much nudge letters as hard shove letters. The way these letters are framed suggests HMRC is presenting claimants with a choice – accept rejection of the claim and walk away or risk possible criminal investigation.
‘By getting the Fraud Investigation Service to put its name on these letters, HMRC is clearly trying to strike fear into taxpayers in the hope that they will back down. HMRC is accusing claimants of fraud without bothering to open formal enquiries. It’s deploying these scare tactics to panic taxpayers into accepting their amendments.’
One point to consider for companies whose claims have been rejected under FA 1998 Sch 18 para 16 is to bear in mind the option open to them to amend the return to reject HMRC’s correction (sub-para (4)), having regard to the time limits in para 15.
