Tax expert Colin Haley told a House of Lords committee in November 2022 that dishonest business owners were taking advantage because computers automatically approved any claim.
He added there was a “Wild West” of tax advisors making money by pushing companies to claim the relief.
“Outside advisers cold-call companies all the time saying, ‘We have a special relationship with HMRC. Some 99% of our claims are accepted by HMRC. It’s free money from HMRC.'”
A HMRC spokesperson told the BBC that the “levels of non-compliance… are clearly unacceptable and the public rightly expect us to take action”.
It added it was taking “decisive action against the minority who deliberately set out to abuse the schemes”.
The number of civil servants working in compliance on the research and development tax schemes has soared to 500 from 100 in the last four years.
Over time, the amount of error and fraud has fallen.
In 2020-21 and 2021-22, HMRC says over a sixth of the money spent on the schemes was lost to error and fraud, much more than it had first estimated.
However, in 2022-23 this fell to 13.3% and then to 7.8% in 2023-24.
The tax agency said errors were more common than fraud.
“The term ‘error and fraud’ includes [a] full range of behaviours, from mistakes and failure to take reasonable care, through to deliberate non-compliance,” it told the BBC.
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