On July 30, 2024, HMRC released their annual report and accounts for 2023-2024, offering important insights into their spending, processing efficiency, compliance measures, and efforts to reduce fraud. At Approved Finance Group, we have summarised the key takeaways from this detailed report to keep you well-informed.
Table of contents:
Approved Tax Innovation Services
Expenditure and Processing
HMRC has shown a strong commitment to innovation by significantly investing in research and development (R&D). For 2023-2024, £7.7 billion was allocated to R&D tax reliefs. Efficiency in processing claims has also been a notable feature of HMRC's performance. Over 80% of R&D tax relief claims were processed within 40 days, consistently meeting their targets. This efficiency ensures that businesses receive necessary financial support promptly, allowing them to continue their innovative work without unnecessary delays. However, it is worth noting that HMRC might still be using a 'pay now, check later' approach in some cases.
Compliance and Fraud Reduction
Addressing error and fraud has been a major focus for HMRC. In 2021-2022, the estimated error and fraud rate was 17.6% (£1.34 billion), with the SME scheme experiencing a higher rate of 25.8% compared to 4.6% for the Research and Development Expenditure Credit (RDEC) scheme. However, HMRC has made significant progress in reducing these figures. By 2023-2024, measures implemented to combat error and fraud had lowered the overall rate to 7.8%, with the SME scheme reduced to 14.6%. The total estimated fraud now stands at £0.6 billion. These improvements highlight HMRC's ongoing commitment to protecting public funds and maintaining the integrity of the tax system.
Moreover, new compliance measures and claim requirements are expected to further reduce error and fraud by an additional £444 million. These proactive steps will enhance the accuracy and reliability of R&D tax relief claims, benefiting both businesses and the broader economy.
Government Actions and Compliance Measures
In July 2023, HMRC introduced a new compliance approach to more effectively address non-compliance. This strategy is part of a broader effort to ensure that tax reliefs are used appropriately and that businesses follow established guidelines. The review of R&D tax reliefs, which began in Spring 2021 and concluded in Autumn 2023, led to several new measures aimed at streamlining the application process, enhancing transparency, and improving the overall effectiveness of the R&D tax relief system. A notable improvement is the direct disbursement of R&D payments to businesses, bypassing intermediaries. This change simplifies the process and ensures businesses receive their funds more efficiently.
Estimating Error and Fraud
To estimate error and fraud rates accurately, HMRC employs the Random Enquiry Programme. This approach provides detailed insights into error and fraud levels within both SME and large business schemes. For 2023-2024, initial projections estimated error and fraud at £1.045 billion. However, after accounting for the impact of compliance measures, this figure was adjusted to £601 million. These adjustments reflect the positive effects of HMRC's ongoing efforts to improve compliance and reduce fraudulent activity.
Conclusion
At Approved Finance Group, we commend HMRC for their efforts in creating a robust and transparent tax system. These initiatives not only benefit individual businesses but also contribute to the overall growth and development of the economy. We take pride in our commitment to compliance, ensuring that our practices meet the highest standards. By staying updated with the latest regulations, we help our clients remain informed and compliant, reducing risks and providing peace of mind.
Our clients consistently provide positive feedback, appreciating our thoroughness and clarity. They value knowing that their financial operations are optimised and compliant, allowing them to focus on their core business activities without concerns about tax issues. By supporting HMRC’s goals and maintaining high compliance standards, Approved Finance Group helps foster a healthier, more reliable business environment, benefiting both our clients and the broader economy.
Approved Tax Services:
At Approved Finance Group, we offer a comprehensive suite of tax innovation services designed to support businesses across various sectors. Our expertise includes:
R&D Tax Credits: We help businesses maximise their claims for R&D tax credits, ensuring they receive the full financial support available for their innovative projects.
Capital Allowances: We provide guidance on capital allowances, helping businesses claim the maximum benefits for their investments in plant and machinery.
Land Remediation Services: Our team assists in securing tax relief for land remediation, supporting businesses in reclaiming costs associated with cleaning up contaminated land.
Stamp Duty: We offer advice on stamp duty reliefs and exemptions, helping businesses navigate the complexities of property transactions and reduce their stamp duty liabilities.
Our goal is to help businesses identify and leverage tax-saving opportunities, streamline their claims processes, and ensure compliance with all relevant regulations. By partnering with us, businesses can optimise their tax position and focus on their growth and innovation.
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