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HM Revenue & Customs (HMRC) has arrested 11 individuals, including tax agents, across multiple U.K. locations in connection with suspected fraud involving the country's research and development (R&D) tax relief programs. The arrests are part of a broader effort to tackle misuse of the government-backed scheme, HMRC confirmed.

Nationwide Operation Targets Tax Fraud

On Tuesday, HMRC executed search warrants at several business addresses across the U.K., arresting individuals who are accused of submitting false or misleading R&D tax relief claims. While the names of the suspects have not been released, the operation marks a significant step in combating tax fraud.

"This is just one small part of the comprehensive and wide-ranging action we're taking to tackle suspected R&D fraud," Jonathan Smith, HMRC's director for agent compliance, said in a statement.

HMRC Arrests 11 Suspected Of R&D Tax Fraud : Companies Under Investigation

Two companies, Green Jellyfish Ltd. and Kirby & Haslam Ltd., have confirmed they are under investigation by HMRC. Both companies, which share a registered address in Norwich, issued separate statements affirming their full cooperation with the authorities.

Kirby & Haslam was founded in 2021, with Sotiris Christophi listed as the director, while Green Jellyfish, incorporated in 2022, is under the control of director Daniel Mark Robinson. Previously, Green Jellyfish was owned by Bryan Thornton and Cfs Secretaries Ltd. until September 2022.

R&D Tax Relief System Under Scrutiny

The U.K.'s R&D tax relief program was designed to encourage companies to invest in innovative science and technology projects by offering tax breaks. However, recent reports suggest that the scheme has become a target for fraud, with losses to taxpayers estimated at over £1.1 billion ($1.5 billion) between 2020 and 2023, according to think tank TaxWatch.

While many companies legitimately use R&D tax relief to reduce their tax liabilities, HMRC has warned businesses to be cautious of dishonest tax agents promising to secure these benefits.

"We're committed to supporting honest businesses, and their agents, to get the tax reliefs they're entitled to," Smith added. "We urge anyone with information about any type of tax fraud to report it to HMRC online."

HMRC Arrests 11 Suspected Of R&D Tax Fraud : Industry Impact and Response

The arrests send a clear message that HMRC is intensifying its efforts to crack down on R&D tax fraud. Green Jellyfish and Kirby & Haslam, which are at the center of the investigation, maintain they have "nothing to hide" and are cooperating with HMRC’s inquiries.