I was interviewed regarding R&D tax credits for this month’s North West Business Insider (link below).
HMRC are cracking down on R&D tax claimants. As with many government policies, it has gone from one extreme to another – an effective ‘anything goes’ with a number of cowboy ‘specialist claim firms’ to HMRC routinely challenging (and denying) entirely legitimate claims. In other words, taking a sledgehammer to crack a nut.
The rules have been tinkered with endlessly since 2021. So far we have had:
-A new tax credit cap – with exceptions
-A new part of the tax return to be completed by claimants (CT600L)
-Denial of relief for overseas contractors in 2023 (which was pushed back to 2024) – with exceptions
-Changes to the rates in 2023
-Changes to qualifying costs to include data hosting/cloud computing
-Changes to qualifying activities to include pure mathematics
-A requirement for an Additional Information Form;
-A new ‘R&D intensive rate’, for which the percentage to qualify changed from 2023 to 2024;
-Advanced notification; and
-Arguably most importantly, a change to HMRC’s underlying policy on R&D, which was never legislated.
We finally have an end in sight with the ‘merged scheme’, which is – according to Jeremy Hunt – a “new simplified R&D tax relief, combining the existing R&D Expenditure Credit and SME schemes”. Except it’s not. There’s going to be two separate schemes running, which includes a second scheme for loss making SMEs. The less generous ‘merged scheme’ came into force yesterday. HMRC updated their guidance on this on Wednesday last week, five days before it came into force (link in comments). Plenty of time to plan then…
Businesses, on the whole, hate tax uncertainty. The R&D tax field since 2021 has been a prime example of an unstable tax environment. Businesses and R&D tax advisors are hoping for a long period of stability after these tumultuous years.
And on the bright side there is still a lot of benefit to completing an R&D tax credit claim where eligible.
