Richard Kovalevsky KC
Partner, London
Richard Kovalevsky KC
Partner, London
Richard Kovalevsky KC is a partner in Cohen & Gresser’s London office and is the head of Criminal Defense and Investigations for the London office. He has over 30 years of experience representing high net worth individuals, directors, and corporations in a wide variety of white collar criminal disputes, regulatory and internal investigations, and civil litigation, with a particular focus on financial crime. Richard has successfully defended against, and has extensive experience advising on, claims of fraud, money laundering, corruption, market manipulation, market abuse, competition and cartel allegations, and insider trading. He has advised and engaged at all levels of the UK court system, as well as being actively involved internationally. Richard regularly handles matters pending before the UK Serious Fraud Office, the U.S. Department of Justice, the UK Financial Conduct Authority, and His Majesty’s Revenue and Customs (HMRC).
Highly regarded by both clients and peers, Richard is currently recognized in Band 1 by Chambers & Partners for Financial Crime: High Net Worth Individuals – UK, as a Leading Individual by The Legal 500 UK for Regulatory Investigations and Corporate Crime (Advice to Corporates) and is recommended in the guide for Commercial Litigation: Mid-Market and Fraud: White-collar Crime (Advice to Individuals). He is also recognized as a leading practitioner in Who’s Who Legal in the Investigations category, in Spear’s 500, and in Best Lawyers in the United Kingdom for fraud-related work. Chambers High Net Worth commentary highlights that “he has a great rapport with clients and they really appreciate his direct and robust approach to matters. He is very focused and really knows what clients want to achieve. Clients will find that he adds a lot of value and brings many additional benefits by instructing him.” The guide has further noted that Richard is “the guru for financial crime issues” with a source maintaining that he is “the most impressive legal mind I have ever encountered.” Chambers High Net Worth has also pointed to Richard’s breadth of knowledge and dedication to his clients. The guide’s commentary maintains that he is “hard-working and knows his subject matter inside out.” The Legal 500 recently observed that Richard is “very commercially aware and pragmatic in the way he represents clients,” with emphasis placed on his ability “to look at a matter and work out the best mechanism of defence.” Further comments note that he is “particularly suited to difficult fraud cases that require lateral thinking and a commercial approach,” “he achieves an uncommon number of positive outcomes,” and “has huge experience and when he talks it is really worth listening.”
Prior to joining Cohen & Gresser, Richard was a partner and head of the financial crime practice at a prominent UK litigation firm. Before that, he practiced as a leading silk (barrister) at 2 Bedford Row.
Publications
Co-author, thebriberyact.com: a leading resource on the UK Bribery Act
Richard Kovalevsky KC is a partner in Cohen & Gresser’s London office and is the head of Criminal Defense and Investigations for the London…
Education
Manchester University LLB Hons
Bar Admissions
England & Wales Barrister & King’s Counsel; British Virgin Islands
Activities and Affiliations
King’s Counsel
Member of the Fraud Lawyers Association
Earlier this year, Richard received top ranking in the Chambers High Net Worth guide.
Published by Chambers & Partners, the 2025 Chambers UK guide ranks the legal market’s best law firms and lawyers in numerous areas of UK law based on thorough independent research, including thousands of client interviews.
Richard Kovalevsky KC has been named a Leading Partner in the Regulatory Investigations and Corporate Crime (Advice to Corporates) category. Thomas Shortland is recognized as a Next Generation Partner in the Commercial Litigation: Mid-Market category, where Patrick Ferguson is also included as a Recommended Lawyer.
Testimonials included in the guide commend the London team as “one of the most impressive around,” noting that the team is “unwaveringly committed and responsive throughout cases” and “achieves victories that clients can usually only dream about.”
Since opening in 2018, Cohen & Gresser’s London office has delivered top-tier legal services to clients globally across a wide range of disciplines. The team collaborates closely with colleagues in New York, Paris, and Washington, D.C., offering seamless support on complex cross-border matters.
The Legal 500 UK Solicitors guide highlights the best lawyers and law firms in the UK through in-depth research, interviews, and analysis of thousands of submissions.
Additionally, partner Richard Kovalevsky KC received a Band 1 individual ranking in this category.
High Praise for Client Service and Sophisticated Work
Chambers highlights C&G’s strength in representing affluent clients in financial crime matters, with references noting that the firm has a “diverse team with different skill sets” with "very professional and prepared litigators capable of intelligently resolving any matter.”
Richard Kovalevsky KC is lauded for his outstanding work for High Net Worth individuals and families facing allegations of fraud or facing tax investigations. "Truly the best lawyer I have ever worked with; a global thinker, a creative mind and an incredibly hard worker," one client noted. "Richard Kovalevsky KC is excellent. He works hard and cares about the work he is doing. He is attentive and responsive," wrote another reference. "Richard Kovalevsky's an extraordinary lawyer and human being; very smart and prepared. Capable of solving large-scale situations."
About Chambers High Net Worth
Published by Chambers & Partners, the 2024 Chambers High Net Worth guide ranks the leading lawyers and law firms for international private wealth. The guide is used by family offices and professional advisers to wealthy individuals, providing objective guidance on an international scale. According to Chambers, “Those ranked in the guide understand the complex needs of HNW individuals and provide specialist advice.”
John leads the firm’s UK White Collar and Investigations practice. His work focuses on complex economic crime, investigations, sanctions, and regulatory matters.
Richard is the head of Criminal Defense for the London office. He has over 30 years of experience representing high net worth individuals, directors, and corporations in a wide variety of white-collar criminal disputes, regulatory and internal investigations, and associated civil litigation, with a particular focus on financial crime.
The Best Lawyers in the United Kingdom relies entirely on peer review to determine and recognize the “highest of talent in the legal industry.”
Opened in 2018, Cohen & Gresser’s London office provides legal services to clients around the world, working closely across practices with colleagues in New York, Washington, D.C., and Paris to provide seamless support on sophisticated cross-border matters. Our UK white collar defense and investigations team represents entities and individuals in complex economic crime, investigations, and regulatory matters.
Andrew is also recognized in both the Criminal Fraud and Investigations categories of the UK Bar Silks report, which lists “the very best barristers … across over 28 areas of business and commercial law, including some of the leading litigators globally.”
WWL identifies leading lawyers across 80 areas of law and in more than 150 countries. Leading practitioners are determined by independent analysis of recommendations and feedback from eminent private practitioners in a particular sector or industry, as well as from corporate counsel or other clients who have worked closely with the nominees.
John Gibson, head of Cohen & Gresser’s UK White Collar and Investigations Practice, is featured as a “Top Recommended” lawyer for Criminal Law and White Collar Crime in the 2024 index. He is commended by Spear’s for his “particular expertise with UK/US cooperation in economic crime investigation” and experience working with the U.S. Department of Justice and Federal Bureau of Investigation. With almost three decades of litigation and advisory experience, including five years as a senior prosecutor in the bribery and corruption unit of the UK’s Serious Fraud Office (SFO), John’s practice at Cohen & Gresser focuses on complex economic crime, investigations, and regulatory matters in the UK, Europe and emerging markets.
Richard Kovalevsky KC has maintained his long-standing status as a “Top Recommended” lawyer in the Spear’s Hommes d’Affaires category. Richard is the head of the Criminal Defense Practice for Cohen & Gresser’s London office, specializing in advising and representing HNW individuals in connection with international and domestic legal matters. Spear’s states, “What’s noteworthy is the wide range of cases that come across Kovalevsky’s desk – from cases involving business, finance, stock market dealings, listings and announcements, to corruption, tax, fraud and money laundering.” The index similarly praises Richard for his wide-ranging client base, which includes global business leaders and high-profile politicians to HNW individuals and members of prominent families.
John and Richard and their UK colleagues work closely with attorneys in Cohen & Gresser’s U.S. and Paris offices on complex multi-jurisdictional matters and offer a multi-disciplinary practice tailored to the needs of ultra-high and high-net-worth individuals and family offices. Leveraging decades of experience, including at premier investment houses, the Bar, and the top tier of elite global law firms, Cohen & Gresser delivers consistent, high-quality service across the types of matters our clients are likely to face, including fund investing and structure, strategic transactions, art law and restitution, privacy and data security, employment matters, tax issues, regulatory considerations, commercial disputes, reputation management, and, when necessary, defense against litigation, investigation, and prosecution.
Published by Chambers & Partners, the 2024 Chambers UK guide ranks the legal market’s best law firms and lawyers in numerous areas of UK law based on thorough independent research, including thousands of client interviews.
Richard Kovalevsky KC received recognition as a Leading Individual in the Regulatory Investigations and Corporate Crime (Advice to Corporates) category, and Thomas Shortland is recognized as a Next Generation Partner in the Commercial Litigation: Mid-Market category. Additionally, John Gibson, Sir David Green CB KC, Ashley Collins, Patrick Ferguson, and Charlotte Ritchie are recognized as recommended lawyers.
Testimonials included in the tables praise the London team as “brilliantly innovative,” “top of the league,” and “standout stars in every way.” Client feedback also highlighted the team’s relentless persistence: “They will work unflaggingly and constantly until they have left no stone unturned and no potentially winning avenue unexplored.”
Opened in 2018, Cohen & Gresser’s London office provides legal services to clients around the world in a variety of disciplines. The office works closely across practices with colleagues in New York, Paris, and Washington, D.C., providing seamless support on sophisticated cross-border matters.
The Legal 500 UK Solicitors reflects the best lawyers and law firms in the UK following extensive research, interviews, and analysis of tens of thousands of submissions.
Jeff Bronheim is featured as a “Top Recommended” lawyer for corporate law and litigation and dispute resolution. Spear’s notes that Jeff is “highly recommended” in wealth management and is an “eminent and personable partner.” Jeff is a partner in Cohen & Gresser’s London office and has over 30 years of experience assisting funds, companies, HNW individuals, and family offices with complex legal and business issues.
John Gibson, head of Cohen & Gresser’s UK White Collar and Investigations Practice, is featured as a “Top Recommended” criminal lawyer in the 2023 index. He is commended by Spear’s for his “particular expertise with UK/US cooperation in economic crime investigation” and experience working with the U.S. Department of Justice and Federal Bureau of Investigation. With almost three decades of litigation and advisory experience, including five years as a senior prosecutor in the bribery and corruption unit of the UK’s Serious Fraud Office (SFO), John’s practice at Cohen & Gresser focuses on complex economic crime, investigations, and regulatory matters in the UK, Europe and emerging markets.
Richard Kovalevsky KC has maintained his long-standing status as a “Top Recommended” criminal lawyer in the Spear’s index. Richard is the head of the Criminal Defense Practice for Cohen & Gresser’s London office, specializing in advising and representing HNW individuals in connection with international and domestic legal matters. Spear’s states, “What’s noteworthy is the wide range of cases that come across Kovalevsky’s desk – from cases involving business, finance, stock market dealings, listings and announcements, to corruption, tax, fraud and money laundering.” The index similarly praises Richard for his wide-ranging client base, which includes global business leaders and high-profile politicians to HNW individuals and members of prominent families.
From Cohen & Gresser’s London office, Jeff, John, and Richard and their UK colleagues work closely with attorneys in Cohen & Gresser’s U.S. and Paris offices on complex multi-jurisdictional matters and offer a multi-disciplinary practice tailored to the needs of ultra-high and high-net-worth individuals and family offices. Leveraging decades of experience, including at premier investment houses, the Bar, and the top tier of elite global law firms, Cohen & Gresser delivers consistent, high-quality service across the types of matters our clients are likely to face, including fund investing and structure, strategic transactions, art law and restitution, privacy and data security, employment matters, tax issues, regulatory considerations, commercial disputes, reputation management, and, when necessary, defense against litigation, investigation, and prosecution.
John’s work focuses on complex economic crime, investigations, and regulatory matters, drawing on his experience as a senior prosecutor and investigation manager in the UK’s Serious Fraud Office. Richard has over 30 years of experience representing high net worth individuals, directors, and corporations in a wide variety of white-collar criminal disputes, regulatory and internal investigations, and associated civil litigation, with a particular focus on financial crime.
The Best Lawyers guide relies entirely on peer review to determine and recognize the “highest of talent in the legal industry.”
Who’s Who Legal (WWL) has recognized John Gibson as a recommended lawyer for Business Crime Defence in its 2023 guide, which provides an in-depth report into the leading lawyers around the world for white-collar criminal defence proceedings. Richard Kovalevsky KC is recognized as a recommended lawyer in the 2023 Investigations guide, which highlights the foremost lawyers working on a wide range of issues in white-collar crime, corporate compliance, and regulatory enforcement. Andrew Mitchell KC has been recognized as a recommended lawyer in WWL's Asset Recovery report, which recognises the foremost asset recovery lawyers and experts from both onshore and offshore jurisdictions. According to WWL: The lawyers recognized in this category "rank highly thanks to their market-leading expertise in the tracing and recovering of lost, misappropriated or stolen assets."
WWL identifies leading lawyers across 35 practice areas and in more than 160 countries. Leading practitioners are determined by independent analysis of recommendations and feedback from eminent private practitioners in a particular sector or industry, as well as from corporate counsel or other clients who have worked closely with the nominees.
Jeff Bronheim is featured as a “Top Recommended” corporate lawyer, with Spear’s highlighting that Bronheim is “highly recommended” in wealth management and is an “eminent and personable partner.” The guide notes that “any Mayfair financier who is thinking of branching out into new business ventures” should “give [Bronheim] a call.” Bronheim serves as the Managing Partner of Cohen & Gresser’s London office and has over 30 years of experience assisting funds, companies, HNW individuals, and family offices with complex legal and business issues.
John Gibson, head of Cohen & Gresser’s UK White Collar and Investigations Practice, is featured as a “Top Recommended” criminal lawyer in the 2022 index. He is commended by Spear’s for his “particular expertise with UK/US cooperation in economic crime investigation” and experience working with the U.S. Department of Justice and Federal Bureau of Investigation. With almost three decades of litigation and advisory experience, including five years as a senior prosecutor in the bribery and corruption unit of the UK’s Serious Fraud Office (SFO), Gibson’s practice at Cohen & Gresser focuses on complex economic crime, investigations, and regulatory matters in the UK, Europe and emerging markets.
Richard Kovalevsky KC has maintained his long-standing status as a “Top Recommended” criminal lawyer in the Spear’s index. Kovalevsky is the head of the Criminal Defense Practice for Cohen Gresser’s London office, specializing in advising and representing HNW individuals in connection with international and domestic legal matters. Spear’s states, “What’s noteworthy is the wide range of cases that come across Kovalevsky’s desk – from cases involving business, finance, stock market dealings, listings and announcements, to corruption, tax, fraud and money laundering.” The index similarly praises Kovalevsky for his wide-ranging client base, which includes global business leaders and high-profile politicians to HNW individuals and members of prominent families.
From Cohen & Gresser’s London office, Bronheim, Gibson, and Kovalevsky and their UK colleagues work closely with attorneys in Cohen & Gresser’s U.S. and Paris offices on complex multi-jurisdictional matters and offer a multi-disciplinary practice tailored to the needs of ultra-high and high-net-worth individuals and family offices. Leveraging decades of experience, including at premier investment houses, the Bar, and the top tier of elite global law firms, Cohen & Gresser delivers consistent, high-quality service across the types of matters our clients are likely to face, including fund investing and structure, strategic transactions, art law and restitution, privacy and data security, employment matters, tax issues, regulatory considerations, commercial disputes, reputation management, and, when necessary, defense against litigation, investigation, and prosecution.
The guide states that C&G is "dedicated to their client’s interests” and is always “responsive and switched on.” Client commentary highlights the firm’s ability to handle complex and sophisticated matters and describes the firm’s lawyers as “incredibly bright” and “prompt and professional.” Additional commentary notes that the firm “punch[es] above its weight in terms of quality of people it has attracted and the work it is instructed on.”
Richard Kovalevsky KC has once again been recognized in the Chambers High Net Worth guide as a Band-1 lawyer for Financial Crime: High Net Worth Individuals in the UK. Chambers commentary notes that Kovalevsky is “the guru for financial crime issues.” Another source calls Richard “the most impressive legal mind I have ever encountered.”
John Gibson has also debuted as an individually ranked lawyer in the Chambers High Net Worth guide for Financial Crime: High Net Worth Individuals in the UK. The guide highlights John’s talent for “distilling large volumes of material and complex issues into practical, usable advice that helps to progress a matter.” Additional commentary notes that he is an “astute criminal lawyer” who is “tenacious, well informed,” and “incisive and action led.”
Since opening in 2018, C&G’s London office has built a roster of superb lawyers, including some of the UK’s most respected former prosecutors. Led by four highly regarded lawyers from the Bar, Cohen & Gresser’s London White Collar and Criminal Defense practice offers unique full-service capabilities with respect to the four major facets of international financial crime practice: regulatory investigations and compliance, criminal defense, settlement options, and anti-money laundering and Proceeds of Crime and Asset Tracing (POCA).
About Chambers High Net Worth:
Published by Chambers & Partners, the 2022 Chambers High Net Worth guide ranks the leading lawyers and law firms for international private wealth. The guide is used by family offices and professional advisers to wealthy individuals, providing objective guidance on an international scale. According to Chambers, “Those ranked in the guide understand the complex needs of HNW individuals and provide specialist advice and legal services.”
Leading practitioners are determined by an independent analysis of the opinions of corporate counsel and investigations experts from around the world. Richard joins a distinguished group of lawyers and experts from 46 jurisdictions who are “considered leaders in the field.”
Who’s Who Legal is an organization that identifies the foremost legal practitioners and consulting experts in business law based upon comprehensive, independent research.
- Regulatory Investigations and Corporate Crime (Advice to Corporates)
- Fraud: White-Collar Crime (Advice to Individuals)
- Commercial Litigation: Mid-Market
- John Gibson: Commercial Litigation: Mid-Market; Fraud: White-Collar Crime (Advice to Individuals); Regulatory Investigations and Corporate Crime (Advice to Corporates)
- Richard Kovalevsky QC: Commercial Litigation: Mid-Market; Fraud: White-Collar Crime (Advice to Individuals); Regulatory Investigations and Corporate Crime (Advice to Corporates)
- Jumana Rahman: Commercial Litigation: Mid-Market
- Thomas Shortland: Commercial Litigation: Mid-Market; Regulatory Investigations and Corporate Crime (Advice to Corporates)
- Tim Harris: Fraud: White-Collar Crime (Advice to Individuals); Regulatory Investigations and Corporate Crime (Advice to Corporates)
- SFO Ruling Casts Doubt Over Other Foreign Material, Lawyers Claim, The Law Society Gazette
- K. Blocks Bid to Get U.S. Company Documents in Fraud Probe, Bloomberg Law (Subscription Required)
- UK Supreme Court Limits SFO’s Investigative Powers, Global Investigations Review (Subscription Required)
- SFO Suffers Serious Blow to International Search Powers, Law360 (Subscription Required)
- Greenberg Secures Victory in Hotly-Anticipated SFO Supreme Court Battle, com International (Subscription Required)
- Serious Fraud Office Suffers Setback after Supreme Court Decision, The Lawyer (Subscription Required)
International law firm Cohen & Gresser today announced that Richard Kovalevsky QC, a distinguished barrister and Queen’s Counsel, will join the firm’s White Collar Defense & Regulation group as a partner in its London office. As head of Criminal Defense for the London office, Richard’s hire will bolster Cohen & Gresser’s highly-regarded White Collar Defense practice and strengthen the firm’s ability to provide clients with sophisticated and strategic guidance on the most complex government and internal investigations.
- On 30 October 2024, the Government published its highly anticipated Autumn Budget 2024 (the “Budget"). Among measures promised to “fix the foundations of the economy” is the Government’s commitment to implement “the most ambitious ever package to close the tax gap,” including by “taking stronger action on the most egregious tax fraud” and “enhancing HMRC’s powers and sanctions against tax adviser facilitated non-compliance.”[1]
- The Government’s declaration of increased scrutiny of the UK’s tax system (and of tax advisors in particular) is consistent with the recent rise in enforcement activity by HMRC against suspected perpetrators of fraud in connection with R&D tax relief, which is intended to allow companies carrying out qualifying R&D to claim tax relief for certain qualifying expenditure.
- Attention on the R&D tax relief scheme has been building momentum over recent years. In its latest published annual accounts, HMRC indicates that over £4bn of its total expenditure on R&D tax relief scheme since 2020/21 was paid out as a result of fraud and error by the taxpayer.
- In September 2024, several arrests were made following raids by HMRC on R&D tax consultancy firms. The arrests came just one day after the Chancellor first announced plans to recruit 5,000 additional compliance staff to help curb abuse of the UK’s tax system.
- This enforcement action underscores HMRC’s focus on addressing misuse of the R&D tax relief scheme. It also suggests renewed vitality within HMRC to investigate and enforce tax non-compliance more broadly, which taxpayers should prepare for following the Government’s commitment to closing the tax gap.
What is the R&D tax relief scheme?
Research and Development (R&D) tax credits were first introduced for small and medium business enterprises in 2000 to encourage scientific and technological innovation within the United Kingdom. Since its inception, the incentive has undergone several legislative changes. Most recently, however, the implementation of the Finance Act 2024 introduced a consolidated scheme allowing for relief in respect of qualifying revenue expenditure upon R&D in accounting periods commencing on or after 1 April 2024.
Broadly, the scheme allows eligible companies[2] to claim tax relief in respect of expenditure on qualifying R&D.
For tax purposes, R&D is defined by HMRC as taking place when a project seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty.[3] Such uncertainty exists “when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field.”[4]
This definition goes beyond common industry uses of the term, such as in accounting or engineering, and requires that the work conducted extends the overall knowledge or capability in the field of science or technology as opposed to the company’s own state of knowledge or capability.[5] The project does not need to succeed in advancing overall knowledge or capability in order to qualify for R&D relief.[6]
The taxpayer bears the burden of proving that qualifying R&D has taken place for the purpose of relief and must evidence that the requirements stipulated in HMRC’s R&D Guidelines have been satisfied. For example, the requirement for a project to address a scientific or technological uncertainty imports a burden on a claimant for relief to provide evidence from a “competent professional” in support of the relevant contention. In Flame Tree Publishing Limited v HMRC [2024] UKFTT 349 (TC), it was held that the claimant company had failed to satisfy this evidential burden, as the “competent professionals” put forward by the claimant were deemed to have insufficient expertise to assess whether the technological problem purportedly addressed by the claimant’s R&D project was in fact an “uncertainty”, as defined by HMRC’s R&D Guidelines.
Why is HMRC taking action?
In recent years, the value of claims for R&D relief has steadily increased. In the tax year 2022-2023, the total relief claimed is estimated by HMRC to be £7.5 billion.[7]
The issue of fraudulent abuse of the scheme first appeared meaningfully on HMRC’s radar in 2021, when a comprehensive analysis of claims paid out under the R&D relief scheme concluded that 17.6% of the total R&D tax relief expenditure was incurred as a result of error or fraud.[8] This high figure is in contrast to an estimated total loss of approximately 4.8% of tax liabilities due across the tax system as a whole.[9]
During parliamentary consultations in 2022, it was suggested that the scheme is susceptible to misuse because of a historic lack of scrutiny within HMRC in reviewing applications for relief. This inattentiveness coincided with a boom in the number of specialist R&D tax advisors marketing their ability to achieve success on behalf of clients who seek to claim R&D relief, with some reportedly describing the scheme as akin to “free money from HMRC.”[10]
Giving evidence to the Treasury Select Committee in October 2023, HMRC Chief Executive Jim Harra placed the blame on tax advisors as responsible for the disproportionate rate of non-compliance:
[R&D] is a very generous tax relief. It is intended to be generous, and it has become more generous over the years because it is intended to incentivise R&D. That then makes it a honeypot, I am afraid, for people for whom it is not intended, and an industry has grown up around tax advisers helping people to make claims that are not compliant. It is partly, I think, the attractiveness of the scheme that attracts those people.
It seems that HMRC is now intent on ramping up enforcement against suspected bad actors in the R&D tax advisory sector. In September 2024, it was reported that 11 arrests had been made in connection with an investigation into R&D tax fraud following raids on several businesses, including Green Jellyfish, a tax consultancy specialising in R&D tax relief. An investigation by The Times newspaper into the consultancy raised the question as to whether the majority of Green Jellyfish’s clients were operating in industries which, on their face, seem unlikely to qualify for the R&D relief scheme, such as a horse-stud business and a butcher. A spokesperson from HMRC stated that increased action against “dishonest tax agents who encourage or facilitate customers making false claims for expenses, rebates or tax credits” should be expected.[11]
In the past year, HMRC has implemented several changes to the R&D tax relief scheme, including requiring that all R&D relief claims are submitted digitally and are endorsed by a named officer of the company. HMRC requires that details of any agent connected to relief claims are disclosed and has terminated the practice of making payments of R&D relief to agents. In the Budget, the Government announced plans to “publish a consultation in early 2025 on options to enhance HMRC’s powers and sanctions to take swifter and stronger action against tax advisers who facilitate non-compliance.” The Budget also revealed that the Government is considering options “to strengthen the regulatory framework of the tax advice market.”
This significant tightening of the rules has been accompanied by an increase in HMRC inspection activity. Since August 2023, the number of compliance checks for R&D tax relief claims carried out by HMRC has increased to over 20% of claims, compared with around 1% previously.[12]
While tax advisors would seem to be the current focus of HMRC, it may not be long until taxpayers, are pursued in respect of non-compliant claims made on advice of an agent. A tax return is the responsibility of the taxpayer and, as demonstrated in a recent judgment of the First-Tier Tribunal Tax Chamber, reliance on an “unchecked assumption” by a company that it is being “appropriately advised” may be argued to fall short of the standard incumbent on taxpayers to take reasonable care in submitting claims to HMRC.[13]
Statistics published by HMRC show that businesses operating in professional, scientific and technical areas are the least compliant when making R&D relief claims. This finding may provide a strong indication of the direction that HMRC intends to take.
Future of HMRC enforcement more broadly
The new Government has promised significant reforms to the UK’s tax system to help “fix the foundations for the UK economy,” including by investing “£1.4 billion over the next five years to recruit an additional 5,000 HMRC compliance staff” to help close the tax gap.[14] Inevitably, these additional resources will result in increased investigative and enforcement activity by HMRC across the UK tax system as a whole in the coming months and years.
HMRC’s criminal investigation guidance states its policy of reserving criminal enforcement for cases where HMRC needs to “send a strong deterrent message” to taxpayers in response to abuse of the UK’s tax system.[15] The recent activity in the area of R&D relief claims, when set against the scale of the potential loss to the UK in terms of revenue, may be seen to be designed to pursue and enforce this policy.
One other possible area of enforcement focus may finally be the “failure to prevent the facilitation of tax evasion” offences, which were introduced in 2017 by the enactment of the Criminal Finances Act 2017 (the "CFA"). Under the CFA, companies and partnerships can be held criminally liable when an associated individual is found to have committed either a UK tax evasion facilitation offence (pursuant to section 45 of the CFA) or a foreign tax evasion facilitation offence (pursuant to section 46 of the CFA) (the “Corporate Criminal Offences”).
The fact that no prosecutions have been brought to date in respect of the Corporate Criminal Offences has attracted increased criticism in recent months. The failure to prosecute under the CFA may be because the purpose of its enactment was to compel cultural and behavioural changes within businesses to encourage the implementation of procedures to prevent the facilitation of tax evasion. However, in light of the new Government’s purported increased attention on tax fraud, it seems likely that any “grace period” for compliance is now over. As of 30 June 2024, HMRC was conducting 11 investigations into the Corporate Criminal Offences and had a further 28 possible investigations under review.[16] It is possible that the first prosecution under the CFA is imminent.
Conclusion
Businesses ought to pay close attention to HMRC’s recent enforcement action concerning suspected R&D fraud. With the new Government promising to prioritise tax compliance, companies should be prepared for increased HMRC investigation and enforcement activity, and would be well advised to take proactive steps to assess and strengthen compliance measures to mitigate potential risks to safeguard against future liabilities.
Endnotes:
[1] https://assets.publishing.service.gov.uk/media/672232d010b0d582ee8c4905/Autumn_Budget_2024__ web_accessible_.pdf
[2] Charities, higher education institutions, scientific research associations, health service bodies, such as NHS trusts, and any other body prescribed, or of a description prescribed, by Treasury order, are ineligible companies pursuant to Section 1142(1), Corporation Tax Act 2009.
[3] HMRC: Corporate Intangibles Research and Development (CIRD) Manual: CIRD81910, [3-4]
[4] HMRC: Corporate Intangibles Research and Development (CIRD) Manual: CIRD81910, [13]
[5] HMRC: Corporate Intangibles Research and Development (CIRD) Manual: CIRD81910, [6]
[6] HMRC: Corporate Intangibles Research and Development (CIRD) Manual: CIRD81910, [38]
[7] https://www.gov.uk/government/statistics/corporate-tax-research-and-development-tax-credit/research-and-development-tax-credits-statistics-september-2024
[8] https://assets.publishing.service.gov.uk/media/66a8ebc349b9c0597fdb0784/HMRC_annual_report_and_ accounts_2023_to_2024.pdf
[9] https://www.gov.uk/government/statistics/measuring-tax-gaps/1-tax-gaps-summary
[10] https://committees.parliament.uk/oralevidence/11556/html/
[11] https://www.thetimes.com/business-money/technology/article/green-jellyfish-consultancy-accused-of-fraud-in-r-and-d-tax-credits-scheme-nvtv9wfdl
[12] https://committees.parliament.uk/publications/43549/documents/216398/default/
[13] David Hill & Anor v The Commissioners for HMRC [2024] UKFTT 844 (TC)
[14] https://assets.publishing.service.gov.uk/media/672232d010b0d582ee8c4905/Autumn_Budget_2024__ web_accessible_.pdf
[15] https://www.gov.uk/government/publications/criminal-investigation/hmrc-criminal-investigation-policy
[16] https://www.gov.uk/government/publications/number-of-live-corporate-criminal-offences-investigations/number-of-live-corporate-criminal-offences-investigations