A few things to put on your radar to ensure you can make the most of R&D claim opportunities whilst aligning with the rules and latest guidelines.
Quinn tax case – HMRC will not appeal
You may have seen quite a lot of excitement regarding a taxpayer victory at first tier Tribunal in June 20 that was published recently. Briefly, HMRC challenged an SME claim as it was argued that the expenditure was subsidised via a client contract. In our view, Judge Morgan correctly found in favour of the company – a client paying a fixed price for an end product should not mean that the client is subsidising any associated R&D.
HMRC will not appeal the decision, but this is not binding as it was a fact specific case.
Whilst the case provides some helpful and interesting commentary, unfortunately it did not consider whether the R&D was ‘contracted’ by the client. We understand this is due to an oversight on HMRC’s part. That said, we await the next case that squarely addresses this point. In the meantime HMRC has updated its guidance on what constitutes contracted R&D (note, this is only guidance, not statute (the law)).
Unfortunately claimants are left with some uncertainty for claims prepared and filed in the interim. Watch this space.
R&D Consultative Forum – brief overview of updates
We also had the HMRC led R&D Consultative Forum meeting last week which was topical and informative as always. A few headlines included:
- Now is the chance for business to make representations regarding any vital R&D that has to be undertaken overseas, and why an exception should be made for this to continue to qualify beyond April 23;
- The new social service and health levy will qualify as staffing cost and for the PAYE cap from April 22 to April 23. Thereafter it may not as it will be collected differently and no longer form part of PAYE/NIC;
- The CT600L form will change again for RDEC claims (step 2 and 3 carry forward amounts).
Please get in touch if you have any questions or would like to discuss further.
And very best wishes for the festive season 🙂
