Treasury confirms review into impact of R&D fraud measure on SMEs

The Chancellor has used his Spring Statement to confirm that the government will publish the result of its consultation into the prevention of abuse of the R&D tax relief scheme for SMEs “in the coming months”.

The 2018 budget contained measures that would restrict the amount of payable credit that a qualifying loss-making business can receive through R&D relief in any one year to three times the company’s total PAYE and NICs liability for that year.

The intention was to tackle fraudulent R&D claims by sham companies however there are concerns that genuine companies with very few employees could be unfairly penalised.

The budget announcement was part of a wider package on tax avoidance and the subsequent consultation will focus on how the measure will be applied and how it will minimise any impact on legitimate businesses.