More than six in ten businesses conducting R&D have scaled back investment following the changes, according to research by advisory firm RCK Partners.

The government created R&D tax credits as an incentive for companies to invest in innovative science and technology projects, with the scheme costing the UK about £8 billion each year.

However, abuse of the scheme - which has seen ineligible companies submitting claims - has led to the tax authority placing more scrutiny on claims.

Abuse of the scheme has seen HMRC place more scrutiny on claims (Image: Archant)

HMRC’s cumulative losses to error and fraud across the R&D tax credit schemes since 2020 total roughly £4.1 billion, according to its own accounts.

Its most recent estimate puts error and fraud at £481 million for the 2024/25 tax year, equivalent to a 5.9pc error and fraud rate on total scheme expenditure.

This is an improvement from previous years........

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