In their sobering article ‘A horrible situation’: the entrepreneurs caught in R&D tax credit debacle, published in the Financial Times on 14 March 2025, journalists Emma Agyemang and Kieran Smith lay bare the emotional and financial fallout experienced by small business owners caught up in HMRC’s intensified crackdown on R&D tax credit abuse. The piece gives voice to entrepreneurs who believed they were accessing legitimate support, only to find themselves entangled in accusations, investigations, and in some cases, demands to repay tens of thousands of pounds.
At the centre of the article is Charlotte Clemence, founder of a garden art business, who once basked in the glow of investment from Dragons’ Den but is now “working for nothing” to repay an R&D credit HMRC later deemed ineligible. Her adviser has vanished, her business partner has walked away, and her company has had to make painful cutbacks. The credit, she stresses, was reinvested into genuine business development, not personal gain.
The article details how such stories are not isolated. Andy Formon, another business owner, spent over a year fighting an HMRC investigation into a £22,000 R&D claim. Despite eventually having the claim upheld, the toll was considerable. Many others simply give up, abandoning claims they are legally entitled to due to fear and fatigue.
This situation stems from a shift in HMRC’s approach. After years of what the FT describes as “light-touch” oversight, the tax authority identified widespread misuse of the R&D scheme. Of the £7.6 billion claimed in 2021–22, an estimated £1.3 billion—18 per cent—was attributed to error or fraud. In response, HMRC has hired 400 new compliance staff, increased investigations, and begun using statutory powers to amend returns without taxpayer consent.
Yet this aggressive clampdown, as Agyemang and Smith report, has swept up genuine claimants alongside bad actors. Industry bodies such as the Chartered Institute of Taxation (CIOT) and the Federation of Small Businesses warn that HMRC's compliance methods are indiscriminate, with poor communication, mistaken claims, and refusal to engage in dialogue. Alarmingly, HMRC appears to be conflating fraud, error, and simple ineligibility—despite these being fundamentally different in both cause and consequence.
Statistics obtained by the FT via freedom of information laws underscore the problem. In 2021–22, only one per cent of SME R&D claims were actually found to be fraudulent. Nonetheless, many legitimate businesses are now avoiding the scheme entirely, undermining the very innovation it was designed to support.
The article calls for more balance. Tax experts do not deny the need for rigorous oversight. But as professionals argue, fairness and proportionality must not be sacrificed. A system that is failing honest claimants is not a compliant system—it is a broken one.
At RandDTax, we encounter the fallout of this environment daily. We believe that HMRC has a duty to protect public funds. But it also has a duty to differentiate the fraudulent from the misadvised and the innovative. Businesses should not need to go to tribunal just to be heard. The current regime risks discouraging innovation at a time when the UK most needs it.
If your business is navigating the uncertainty of R&D tax credits or has been affected by compliance action, we can help. Our approach is based on technical rigour, compliance with HMRC guidelines, and a genuine understanding of the scheme’s intent. You deserve advice that protects you and your business.
Speak to us today: Contact RandDTax
Christopher Toms MA MAAT
Compliance Director
RandDTax