Green Jellyfish Consultancy Faces Allegations of Fraud in R&D Tax Credits Scheme

Green Jellyfish, a consultancy firm, is facing serious allegations of manipulating tax incentives designed to support research and development (R&D) initiatives. Reports suggest that the firm submitted claims on behalf of businesses in industries typically ineligible for such incentives, including a butcher, a baker, and a candlestick maker.

According to sources familiar with the situation, the Norwich-based consultancy has been implicated in a scheme where it allegedly helped companies wrongly claim state support. This has raised concerns regarding the integrity of the R&D tax credit system.

Recently, one of the staff members from Green Jellyfish was arrested and subsequently released during an ongoing investigation by HM Revenue and Customs (HMRC) related to potential fraud involving R&D tax credits.

In a statement, Green Jellyfish expressed its intention to cooperate fully with HMRC, asserting, “We have nothing to hide. One member of staff from Green Jellyfish was arrested and questioned for just under an hour and has been released without charges.”

Before the arrest took place, tax lawyer Dan Neidle, founder of Tax Policy Associates, accused Green Jellyfish of submitting a multitude of potentially fraudulent claims to the R&D tax credit program.

The R&D tax relief initiative is designed to incentivize companies engaged in technological and scientific projects, leading to an estimated annual cost to the UK government of around £8 billion.

HMRC has acknowledged significant abuse within these schemes. Reports indicate that an estimated 26% of relevant expenditures in a version of the tax relief for smaller companies were misreported, resulting in a staggering £1.2 billion in 2021-22.

Tax Policy Associates has labeled the scheme a “very expensive failure,” estimating that the total financial impact relating to fraudulent and erroneous claims could reach £10 billion.

In a recent crackdown, 11 individuals, including tax agents, were arrested on suspicions of tax revenue fraud and money laundering associated with R&D tax credits.

This wave of arrests was spurred by previous investigative reports from The Times in 2022 that highlighted how advisory firms were persuading clients to make questionable claims without adequate verification from HMRC.

Insiders have claimed that Green Jellyfish targeted businesses in industries that typically do not conduct eligible R&D activities. For example, nearly 10% of their clientele was reportedly from the plumbing and heating sector, while 5% came from health and social care, both of which are unlikely to engage in qualifying research.

Other businesses alleged to have received claims facilitated by Green Jellyfish include a horse-studding venture, a Christmas lights manufacturer, a cleaning service, and a children’s ballet school.

A spokesperson for Green Jellyfish stated that the firm implements stringent checks when evaluating claims but refrained from providing further commentary due to the ongoing criminal investigation.

Tax experts have highlighted that the evaluation of claims can be complex, noting that HMRC has indicated that most non-compliance stems from reasons other than fraud.

HMRC is actively working to enhance compliance within the R&D tax credit landscape, leading to reported difficulties for companies seeking these incentives. Neidle remarked, “It is perplexing how this misuse could persist for such a long duration without action, particularly after the revelations in The Times in 2022. Moreover, it is unfortunate that legitimate biotech firms are facing challenges in securing relief for their genuine R&D efforts while invalid claims have burdened the public purse.”

Last week, HMRC reported a 23% decline in claims under the small and medium-sized enterprises scheme for the tax year 2022 to 2023.

A representative of HMRC affirmed, “The level of non-compliance we have observed is unacceptable, and we are committed to scrutinizing these claims rigorously. This is why we are enhancing compliance efforts, and we are also targeting dishonest tax agents who facilitate the submission of false claims for tax credits and rebates.”

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