Suffolk companies making minor errors in applications for a tax relief have been left feeling fearful after an HMRC crackdown, business leaders have warned.
Suffolk Chamber is urging the government to implement urgent reforms to its Research & Development (R&D) Tax Relief system, which was launched in 2000.
A report by the chamber suggests recent changes in practice and personnel at His Majesty’s Revenue & Customs (HMRC) meant companies were facing an "overly strict" compliance regime.
The tax officials are cracking down on what the chamber describes as a "wild west" regulatory system in terms of who can act as R&D tax advisers.
This was undermining take-up and confidence, the chamber warned.
The Chamber's R&D Tax Reliefs Task & Finish Group chairman Steve Elsom - a director of Number 4 Consulting - said their own research showed companies which might have made a very minor administrative error in their application are counted as fraudulent.
“Our original research into local businesses’ experiences shows that the lack of knowledgeable experts at the HMRC, plus the imposition of an overly strict compliance regime is causing many legitimate companies’ most recent claims to be delayed and/or refused, with others fearful that previously successful claims from previous years might now be challenged," he said.
“Every right-thinking person applauds the crackdown in fraudulent claims, but the HMRC appears to be going to extremes in its definition of the term."
Since 2000, thousands of Suffolk-based small companies across a range of sectors are estimated to have benefited from the scheme - leading to a jobs and investment boost.
The Task & Finish Group - which collected case studies - carried out a survey which showed 46% of respondents are now deterred from making future claims based on their latest experience.
Matt Moss, chair of Suffolk Chamber’s Economy Group which commissioned the Task & Finish Group, said he was pleased that the report is recommending the appointment of an industry regulator, and calling for claims to be signed off by senior qualified accountants.
“The lack of any meaningful regulation means that the market is flooded with poorly qualified advisers who frequently fail to provide the best level of service to their business customers," he said.
The group has welcomed a government announcement in the Spring Budget of an expert panel to look into some of the problems being identified.
But it is calling for its remit to be broadened beyond the two sectors – life sciences and tech – proposed and to focus on small businesses' concerns.
The Group has shared its report with HMRC, the British Chambers of Commerce, Treasury and shadow Treasury ministers as well as Suffolk’s seven MPs and selected Parliamentary candidates.
Suffolk Chamber said it will be lobbying for the changes recommended in the report and said it would form a key part of its General Election manifesto.
The report recommends that the government invests in more and better qualified HMRC staff - and that its approach to reducing fraudulent claims is better targeted and more evidence-based.
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