A government scheme to encourage small firms to invest in research and development (R&D) suffers from tax inspectors with little scientific knowledge and long delays, according to a press report.
The Daily Telegraph claims that the R&D Tax Credit scheme, launched by Chancellor Gordon Brown in 2000, is 'a shambles'.
Under the programme, tax inspectors from the Inland Revenue are asked to evaluate claims for cash relief based on whether the project backing the claim constitutes a technological advance.
The tax inspectors, however, have little scientific training and often make mistakes in what they deem are advances.
Tax inspectors then move to reclaim the money once the Inland Revenue realises a mistake has been made, often occurring years past the date the tax relief application was approved, the newspaper claims.
Currently, the Inland Revenue is trying to recoup such losses by questioning up to two-thirds of all the applications it has approved under the scheme over the last two years.
"The process is a shambles, especially when it's so easy to consult with people and know how to get it right," the Telegraph quotes an insider from a joint business and Inland Revenue review of the scheme as saying.
The insider told the newspaper that when the government launched the scheme it decided against hiring specialist scientists and engineers to advise tax inspectors on whether a project applying for relief is actually a scientific advance.
Tax inspectors are, thus, making decisions with little scientific knowledge, leading to stress and even reports of breakdowns, the Telegraph's insider said.
Some 90% of complaints associated with the programme come from the Inland Revenue's Cardiff team, its inspectors suffering, the insider said, from repeated rules changes.
The Department of Trade and Industry (DTI) issued a set of guidance notes for inspectors to follow in April 2000, which were subsequently revised in 2002 and 2004.
It is understood, the newspaper states, that the DTI is about to consult again on further 'simplifications' to the guidance notes, and officials have already made up their minds that employing teams of scientific experts will cost too much.
At the time of writing, a spokesperson for the Inland Revenue was unavailable for comment.