Green Jellyfish consultancy accused of fraud in R&D tax credits scheme

A consultancy accused of abusing multibillion-pound tax incentives meant to support science and technology projects allegedly submitted claims from a butcher, a baker and a candlestick maker.
Green Jellyfish targeted companies in sectors alleged to be ineligible for the incentives and successfully submitted claims for state support on their behalf which should not have qualified, sources close to the company claimed.
The Norwich-based consultancy said last week that a member of its staff had been arrested and released under investigation amid an investigation by HM Revenue and Customs into “suspected fraud” on research and development (R&D) tax credits.
The company said: “We are fully co-operating and supporting [HMRC] with the investigation, as 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.”
Prior to the arrest, the company had been accused by Dan Neidle, a tax lawyer and founder of Tax Policy Associates, of submitting “a series of fake and potentially fraudulent” claims to R&D tax credit schemes.
The schemes are intended to allow companies working on science and technology projects to claim tax incentives to encourage innovation. R&D tax relief costs the UK about £8 billion a year.
HMRC has admitted the schemes have been subject to an unacceptably high level of abuse. Error and fraud on a version of the tax relief for smaller companies comprised an estimated 26 per cent of relevant expenditure in 2021-22, or £1.2 billion, one of the worst performances of any public spending programme.
Tax Policy Associates has called the programme a “very expensive failure” and in a new analysis estimated the total cost of fraudulent and mistaken claims on the schemes was £10 billion.
Last week 11 people, including tax agents, were arrested on suspicion of cheating the public revenue and money-laundering offences in relation to R&D tax credits.
The arrests follow an investigation by The Times in 2022 which revealed how the incentives were being targeted by advisers encouraging companies to make dubious claims, few of which were checked by HMRC.
Sources alleged that Green Jellyfish targeted companies in sectors that were unlikely to be eligible.
Close to 10 per cent of its clients have been in the plumbing and heating sector, while 5 per cent were in the health and social care sector, sources claimed. Experts said companies in these industries were unlikely to conduct qualifying research.
Other companies that had allegedly successfully made claims through Green Jellyfish despite being unlikely to qualify were a horse-studding business, a Christmas lights company, a business that provides cleaners and a child’s ballet school, according to the sources.
A butcher, a baker and a candlestick maker also featured among the company’s clients, it was claimed.
A spokesman for Green Jellyfish said it “applies detailed checks and balances when evaluating and submitting claims. Given that a criminal investigation is underway we are, regrettably, unable to provide further comment at this time.”
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Tax agents have pointed out that evaluating claims was not a black-and-white process and HMRC said the “majority of non-compliance is down to behaviours other than fraud”.
The tax authority has launched a crackdown on the programmes and companies have reported problems obtaining the incentives. Neidle said: “The mystery is how this went on for so long and why it wasn’t until The Times reports in 2022 that action was taken.
“The shame of it is that there are biotech companies struggling to claim relief for really significant R&D, whilst invalid claims have cost the country billions of pounds.”
Last week HMRC said that for the tax year 2022 to 2023, in the small and medium-sized enterprises scheme, the volume of claims dropped by 23 per cent.
A spokesman for HMRC said: “The level of non-compliance we have seen is unacceptable and taxpayers rightly expect us to scrutinise claims. That is why we have increased compliance activity. We do that thoroughly and fairly. We are also taking action against dishonest tax agents who encourage or facilitate customers making false claims for expenses, rebates or tax credits.”