Research and Development (R&D) tax credits are a UK government incentive designed to encourage investment in R&D by businesses of all sizes and across a wide spectrum of industry sectors. This crucial source of funding has enabled a number of breakthrough innovations, particularly in the IT, life sciences and agriculture sectors.
However, in recent years, there has been an increase in R&D tax fraud, where companies submit false or exaggerated claims to receive tax relief they are not entitled to. This has had a significant impact on the recruitment market in the R&D tax sector, as companies become more cautious in their hiring practices.
R&D tax fraud typically involves a company submitting an R&D tax credit claim that includes costs or activities that do not qualify for relief. This can include overstating the amount of R&D expenditure, claiming for non-qualifying activities, or submitting false supporting documents. The result is that the company receives a higher tax credit than they are entitled to, resulting in a loss of revenue for the government.
The UK government has recently taken steps to crack down on R&D tax fraud, including the establishment of a specialist R&D tax fraud team within HMRC. As a result, companies are increasingly more likely to seek the advice of R&D tax professionals and to conduct thorough due diligence on their claims, before submitting them.
This caution is having a marked impact on the recruitment market within R&D tax. Companies are now more selective when it comes to hiring R&D tax specialists. They are looking for individuals with solid and specific R&D tax experience, which has made it slightly more difficult for those without a significant amount of experience in R&D to break into the sector.
R&D tax consultancies are typically seeking out candidates with proven experience working on HMRC fraud enquiries and ideally with experience working in compliance. They are also increasingly insisting upon candidates holding a recognised accounting or tax qualification, such as ACCA, ACA, CTA or ATT.
Such is the level of scrutiny on claims now that more R&D tax firms have opened up a compliance team to work on HMRC enquiries and defend the claims. Hiring candidates who are highly qualified not only validates their skill set, it also helps to cement the hiring company’s reputation, in turn reassuring their own clients about the legitimacy of individuals working on their R&D tax claims.
The flipside of all this, from the candidates’ perspective, is that they don’t want to work for firms which have had a high level of enquiries, since that signals that the consultancy is perhaps not being selective about who they work with. So, while the hiring companies want experience of working on enquiries, many talented candidates have typically avoided this nature of work in the past. So it’s a bit of a vicious circle. It therefore stands to reason that those rare candidates who do have this experience, combined with the qualifications, are highly sought after at this present time.
In addition to the impact on recruitment, R&D tax fraud also has broader implications for the UK economy. The loss of revenue to the government means that there is less money available for investment in R&D, which many fear will now slow down innovation and technological progress. It also undermines the credibility of the R&D tax credit scheme, which is an important incentive for businesses to invest in R&D.
R&D tax fraud is a serious issue in the UK that is impacting the recruitment market both negatively – with individuals wishing to break into this sector being overlooked for candidates with more experience – and positively, in the sense that legitimate businesses with valid claims are increasingly looking to R&D tax specialists to submit their claims.
And finally, with the introduction of cuts to R&D tax credits in the UK having just been implemented in April, it will be interesting to see what impact these measures do actually have in the bid to combat R&D tax fraud.