Xander Gilbert, the founder of Mojo, a men’s sexual health application, finds himself in an ongoing dispute with HM Revenue & Customs (HMRC) as the agency seeks to reclaim over £400,000 in research and development tax credits that were awarded to his company last year.

The 35-year-old entrepreneur expressed his frustration: “Every new set of questions from HMRC feels like a repeated request for information we’ve already provided. It’s incredibly disheartening,” Gilbert said. He launched Mojo in 2019 alongside his cousin, Angus Barge, after experiencing erectile dysfunction.

Having raised more than £5 million from investors, including Kindred Capital and Octopus Ventures, Gilbert claims that Mojo has attracted “hundreds of thousands” of users across 150 countries. “We’re enhancing their relationships and sex lives; we’re even helping some users to conceive, including myself,” remarked Gilbert, proud father of three young children.

In early 2024, Mojo received £400,000 in R&D tax credits aimed at advancing its technology, which includes personalized coaching powered by artificial intelligence.

Recently, the company announced its shift towards becoming an AI-driven sex and relationship therapy platform, noting the shortage of sex therapists in the UK compared to the number of individuals needing such support.

However, just a few months later, Gilbert received a letter from HMRC stating, “We require the money to be returned; we believe the original claim was incorrect.” This was particularly disconcerting for the founders, who had enlisted the help of FI Group, a consultancy specializing in tax claims.

“They have assisted us in communicating with HMRC, but if this escalates to arbitration, we may need to engage legal representation,” Gilbert explained, emphasizing their commitment to not retreat from this challenge.

Mojo’s situation reflects a broader trend, as HMRC has taken a stricter approach in reviewing tax credits awarded to numerous companies since 2023. Many recipients have reported receiving requests for extensive additional information regarding their research and development activities.

These recovery efforts are part of HMRC’s initiative to combat fraudulent claims following investigations that uncovered significant misuse of taxpayer-funded support. Reports have emerged of implausible claims, including one regarding a business offering recipes for blueberry croissants.

In 2019, British businesses claimed relief related to £47.5 billion of research and development, despite Office for National Statistics data suggesting only £25.9 billion of such activities were actually carried out. This disparity indicates potential inconsistencies in claims versus actual R&D activities.

HMRC has acknowledged a high level of fraud and errors within the scheme, estimating that 26% of expenditures for smaller companies in 2021-22, amounting to £1.2 billion, fell under dubious categorization.

Experts, including former Chancellor Philip Hammond, caution that an overly aggressive stance from HMRC could undermine legitimate claims, deterring companies from pursuing R&D support.

Despite continuing to fulfill HMRC’s requests, Gilbert described the nature of the questions as repetitive and inappropriate. “It feels as though individuals at HMRC are more focused on reclaiming funds than on assessing our legitimate innovations,” he noted.

For instance, HMRC’s insistence on timesheets as proof of work has posed a challenge for Mojo, as the company’s understanding of HMRC guidelines allows for estimates rather than strict time tracking.

Gilbert is not isolated in this predicament. Several entrepreneurs have reported facing similar hurdles but hesitate to speak publicly due to concerns it may adversely affect their cases. Alicia Navarro, an experienced technology entrepreneur, shared her own struggles with HMRC regarding an R&D tax credit for her business, Flown, emphasizing the confusing inquiries faced by her qualified engineering team.

To be eligible for R&D relief, HMRC stipulates that projects must aim to achieve advancements in scientific or technological fields, which must be recognized by competent professionals as significant improvements.

In response to these concerns, an HMRC spokesperson stated: “R&D reliefs are crucial to our mission to drive economic growth, and we are committed to simplifying the claims process for genuine applicants. Given the levels of non-compliance, it is essential to ensure that taxpayer funds support true R&D efforts. This involves everything from investigating fraudulent claims to educating applicants on compliance.”