Shaping the future of R&D tax benefits
Our wish list of changes that would encourage businesses to claim R&D tax benefits.
- The tax legislation is currently both voluminous and can be difficult to understand or interpret. A simplification and codification of the existing legislation would encourage more businesses to claim R&D tax incentives.
- The tax legislation currently does not stipulate the information that should be included in a claim. This causes much confusion and differences of opinion amongst both claimant companies and tax professionals. One solution could be for claims to be made through the completion of a standard HMRC form, which specifies certain mandatory information.
- The tax legislation does not include a definition of qualifying research and development and refers only to guidance from the Department for Business Innovation and Skills (BIS), which was last updated in 2010. Unhelpfully, and rather confusingly, this differs from the accounting definition of R&D.
It is hoped that HMRC’s stated long term aim of providing ‘certainty’ to businesses will mean that businesses get more practical guidance to help them evaluate when R&D tax incentives can be claimed.
- There are currently two R&D schemes and tax relief is given in two completely different ways: the 'enhanced tax relief' SME scheme and the 'R&D expenditure credit' Large company scheme. Current R&D tax incentives could be simplified by replacing the two schemes by one scheme with a sliding scale of tax benefits, dependent on company size.
- HMRC remain committed that, in the post-Brexit era, the UK’s R&D tax incentives will remain competitive. As corporate tax rates start to fall, we would like to see the value of R&D tax benefits protected by increasing the SME tax uplift to compensate for the reductions in headlines rates. On the other hand Large companies claiming R&D tax benefits through a fixed tax credit will become more valuable as the corporate tax rates drop.
- Under EU legislation SME R&D tax incentives are limited, and in certain circumstances prevented, where companies receive grant funding. Now that the UK is going to exit the EU, could there be an opportunity to review these limits and perhaps remove them?
How we can help
Our specialist team have dealt with R&D claims for many years with a wide range of business sectors. Contact us if you wish to maximise the available benefits.