Another unearthed scandal of Tory waste

In late July, I wrote that the last Tory government had lost a staggering £112 billion through fraud and incompetence. It now turns out that I was wrong – it has lost even more.

Hidden deep in HMRC’s annual accounts last week was the shocking news that some businesses, large and small, have been falsely enriching themselves via a government scheme to encourage investment and technology.

So-called corporation tax research and development reliefs were supposed to allow companies to invest heavily in cutting-edge technology and get the money back in lower corporation tax. Instead, it seems that many have been filing dodgy claims. The Guardian reports that one restaurant tried to get money back on its tax bill because it had introduced a vegan offering on its menus.

HMRC only recently started auditing the scheme by randomly checking applications and has found that “error and fraud in corporation tax research and development reliefs was £1.1 billion or 16.7% of related expenditure” Given that the scheme has been running for four years, we can estimate that £4 billion has been lost so far.

HMRC is not standing idly by while this massive fraud is continuing, oh no. The tax man has introduced “recent compliance interventions” – what the rest of us would call checks – which it thinks is saving £250 million a year.

But it won’t be sure for another year or so, until the final calculations are made. Which means it is still losing around £750 million a year – we hope.

This goes beyond just a simple story of businesses pushing the boundaries and collecting free money by putting in cheeky application forms where they should have been investing for growth. It is a cautionary tale about how the Conservatives operate in power.

While we were all being told that there was no money, that the coffers were empty, that taxes had to rise and spending had to be slashed yet again, the government was happily handing a billion a year as a giveaway to businesses who swindled the nation.

At the same time, carers who accidentally overclaimed for a few pence and people who forgot to cancel their benefits when their part-time hours went up were punished severely. Their mistake was not having ‘clever’ financial advisers who could help them knowingly defraud the system to make off with £1 billion a year.

The Conservative Party used to be the party of business. But for years now it has been the party of the tax dodgers, the greedy and the get-rich-quick merchants while the rest of us played fair and paid the price.