The Government recently consulted on the future of R&D Tax Reliefs seeking views from a broad audience.
The consultation considered:
- definitions, eligibility and scope of the reliefs, to ensure they are up-to[1]date and competitive, and that they reflect how R&D activity is conducted now,
- how well the reliefs are operating for businesses and HMRC, and whether this could be improved,
- targeting of the reliefs, to ensure that for every pound of taxpayer support, we maximise the value of the beneficial R&D activity for the UK economy.
We submitted a representation on behalf of Bright R&D with input from our clients who claim R&D tax relief and R&D Expenditure Credits.
In summary, we asked for three key changes to the regimes:
- Alignment of the SME and RDEC regimes so that both operate as ‘above the line’ credits, albeit at differential rates of credit;
- Broadening of qualifying expenditure beyond pure software license costs to include hosting costs, data/data sets required for development and testing purposes etc.;
- An additional incremental R&D credit for expenditure over and above an average of prior years’ expenditure (as per the R&D claims filed) to encourage more R&D investment year on year;
To improve governance, we represented that:
- All firms advising on R&D claims should be required to have tax qualified staff and be affiliated to a relevant professional body to promote ethical behaviour and reduce considerable abuse of the regime by non-qualified advisors.
- Whilst the Corporation Tax self-assessment system is an efficient mechanism for administering R&D claims, we see merit in requiring an R&D Report to be filed in support of numerical claims.
- It should be made explicitly clearer that companies not providing comprehensive information upfront will be treated more harshly in cases of adjustments and penalties.
Output from the consultation is expected later this year. For further information, please get in touch.
