REVEALED: R&D TAX SCHEME CHANGES
29 July 2022
The Research & Development Communication Forum (formerly known as the R&D Consultative Committee) is an HMRC-sponsored group of HM Revenue & Customs officials and professional bodies who meet every 6 months to discuss the operational delivery of the UK’s R&D tax relief schemes. As a member the forum, I sit in on these meetings to bring updates to our clients, with the latest being held on 13th July 2022 prior to ‘L-Day’ (Legislation Day), 20th July 2022.
Here we’ve summarised some of the key points that may affect you and your business…
a new requirement to pre-notify
As part of HMRC’s anti-abuse measures, companies will need to advise HMRC (using a digital service) that they’re planning on making a claim before they make it (within 6 months of the end of the accounting period, unless they’ve claimed in the previous 3 years). At Fortus we’ll be supporting our clients to make sure all the relevant information required for this pre-notification, so they can continue to access the tax relief they’re entitled to.
continued targeting of abuse & improving compliance
The government continues to tackle abuse and boundary pushing by requesting further information from companies when making claims. All claims should be made digitally and will need to give details of where an agent has supported the company, and a senior officer of the company must endorse the claim. Moving forward, the government will be considering whether further measures are needed.
R&D remains high on the priority agenda
The government’s announced a number of initiatives aligned with the goal of unlocking private sector investment. These include investing £100 million to pilot new Innovation Accelerators, £118 million in UK Research & Innovation’s (UKRI) Accelerating Impact programme to help turn the best, brightest, and most disruptive ideas emerging from UK universities into innovative businesses and services.
They’re also investing in Innovate UK’s Fast Start Competition which will provide a new series of Fast Start grants worth £30 million to back UK start-ups and entrepreneurs to develop new innovative products, processes and services.
When it comes to HMRC’s performance in processing tax claims… 42,073 R&D tax credit claims and 6,716 R&D Expenditure Credit (RDEC) claims were processed during 2021-22 and 98% were paid within 28 days, but, since then…
claim processing time’s increased
With the number of claims increasing (5% on 2021) and more compliance checks being undertaken, HMRC’s processing time for R&D tax relief claims has increased from 28 days to 40 days. They’re planning to return to the 28-day timescale asap with increased trained resource within processing teams. With these delays, it’d be wise to get any outstanding claims in as soon as you possibly can and to review your longer term R&D pipeline.
technical changes to legislation
The government’s also making some technical changes to the legislation to ensure R&D tax reliefs continue to operate as intended. These include the treatment of the reliefs within a system of two Corporate Tax rates, and Introduction of the Health and Social Care Levy (HSCL). There’ll also be changes to the Patent Box regime to reflect data and cloud costs.
43 new qualifying bodies introduced
The Statutory Instrument (SI)’s been updated to include 43 further qualifying bodies which are going through the Parliamentary process.
gov to increase rdec generosity
The government will consider increasing the generosity of the Research and Development Expenditure Credit (RDEC) scheme and companies will be allowed to claim RDEC if they’d previously incorrectly claimed SME relief on expenditure. They’ll also be given more time to amend the SME claim to an RDEC claim.
There’s also promise of supporting businesses growing and transitioning from the SME scheme to RDEC. Where an SME within a group becomes large, all companies in the group will retain SME status for one year afterwards.
when will final legislation come into effect?
Final legislation, subject to Parliament, comes into effect April 2023.
The government state that the measure ‘is expected to have significant business impact on approximately 90,000 businesses claiming R&D tax reliefs. One-off costs could include familiarisation with the changes and updating systems to reflect them. These costs are estimated to be negligible.’
MORE ADMIN BURDEN…
They also state the measures ‘could negatively affect businesses’ experience of dealing with HMRC as the changes are complex and require additional tax admin tasks to be completed. This will be addressed by clear guidance to advise of changes and by communications including through the Research and Development Communication Forum (RDCF).’
And that’s where we come in. We’re here to take some of the administrative burden away, so you can focus your time on your R&D work and growing your business.
If you’d like to find out in greater detail what these updates could mean for your R&D claims, or if you’d like to look into your eligibility, then speak to our team today on 01904 211637.