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Research & Development Tax Relief Consultation

Innovation is at the heart of the UK’s strategy to boost productivity and economic growth. As an incentive, the government continue to explore Research and Development (R&D) Tax relief and the companies it encompasses to ensure they continue to push their industries’ innovation and competitiveness.

Today an R&D consultation has been released, which means they are looking more closely at a few key topics:

  • Definitions, eligibility and scope of the reliefs and if they remain fit for purpose (the level of innovation is changing rapidly).
  • How well they are operating and where there can be improvements made – both for taxpayers and HMRC.
  • Targeting of the support to ensure they maximise value from the funding.
  • Rates of relief to ensure the scheme remains both competitive as compared to other nations, and that it actually stimulates additional R&D investment.

As a firm which acts for a large portfolio of R&D clients, we will be responding to the consultation and providing our clients with any relevant insights affecting them, however, it is not anticipated to change the normal course of completing claims in the short term. We anticipate that there may be consideration of closing the gap between the SME (small and medium enterprises) and RDEC (large company scheme) credit rates between the two schemes, and possibly even unifying the two schemes into a single scheme with two different rates.

In a previous consultation, the scope of eligible qualifying costs was discussed, and today the outcomes have been announced. Specific costs relating to accessing datasets and payments for cloud computing services were considered, and there was a broad consensus amongst respondents that such costs should be brought within scope.

The consultation, interestingly, highlights evidence that the RDEC scheme stimulates considerably more additional investment per pound of relief than the SME scheme. This suggests an undertone of concern that the SME scheme may not be having the desired behavioural effects. There is a lot of concern at the current time about spurious claims with a lot of unregulated and inexperienced operators in the R&D advice market at the moment, and we are aware that HMRC has taken on a lot more staff to police these claims, so a higher level of enquiry activity is likely in the short term.

Our claims are prepared to a high standard, which has been used to save our clients over £21million in Corporation Tax in the past six years. In this time, we have also encountered very few enquiries in comparison to the level of submissions due to our attention to detail and providing high quality evidence so we minimise the chances of enquiry where possible. If enquiries are raised, we are experienced in bringing these to a close as quickly as possible.

If you have any questions for our Tax experts as a result of this Budget, please contact us on 01242 776000 or tax@randall-payne.co.uk.