Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether HMRC includes estimates of fraud and error in Research and Development tax credit claims in its calculation of the tax gap.

Estimates of error and fraud relating to Corporation Tax research and development tax credit claims are out of the scope of HMRC’s ‘Measuring tax gaps publications’, which can be found here: https://www.gov.uk/government/statistics/measuring-tax-gaps. The tax gap estimates only cover the taxes administered by HMRC and excludes payments made by HMRC, including research and development tax credits.

Estimates of error and fraud in research and development tax credit claims are published in HMRC’s Annual Report and Accounts, which can be found here: https://www.gov.uk/government/collections/hmrcs-annual-report-and-accounts. In 2020-21, the estimated level of error and fraud in research and development tax credits claims was 3.6 per cent (£336 million) of the estimated cost of the reliefs (£9.3 billion). The estimated level of error and fraud is 5.5 per cent (£303 million) in the small and medium enterprises scheme and 0.9 per cent (£33 million) in the research and development expenditure credit scheme.