As announced in the Budget last week, HMRC has now opened a consultation on R&D tax credit claims.
The UK is currently a global leader in science and innovation. Supporting the world class innovation in the UK is a key government priority. The Government’s target is to raise total investment in research and development to 2.4% of UK GDP by 2027. R&D tax reliefs have a key role in incentivising this investment by reducing the costs of innovation. It is therefore essential to ensure that the reliefs remain up-to-date, competitive and well-targeted.
This consultation will explore further with stakeholders, the nature of private-sector R&D investment in the UK, how that is supported or otherwise impacted, by the R&D relief schemes, and where changes may be appropriate. It will look at:
- Definitions, eligibility and scope of the reliefs, to ensure they are up-to 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
There are currently two R&D schemes in operation in the UK, the RDEC scheme which gives an ‘above the line’ credit of 13% for large companies, and SMEs where they have received funding, and the SME scheme which gives an enhancement of 130% on qualifying costs and a 14.5% credit when losses are surrendered.
Under the current schemes, the categories of qualifying expenditure are staffing costs, consumables, software, certain subcontracting costs and clinical trial volunteer payments. HMRC is considering if the scope for qualifying costs should be increased. They recently concluded a consultation on cloud computing and data, they want to consider other costs which are fundamental to R&D.
As part of the consultation, HMRC are considering if the schemes remain appropriate, or if they should be condensed. This could mean RDEC for all with a higher rate for SMEs.
HMRC is also considering applying better incentives for certain R&D, such as green technology, where the Government wants to encourage the research.
HMRC has collated 17 questions which they are looking for feedback on from companies completed R&D tax credit claims, as well as other key stakeholders such as accountants and universities. The consultation is open until 02 June 2021.
If you are interested having your say, details of their questions and where to send answers can be found here.