Beavis Morgan responds to the Government’s R&D Tax Reliefs Report
Last year the Government launched a review of the Research and Development (R&D) tax relief schemes. The objectives were to ensure that the UK remains a competitive location for cutting edge innovation, that the reliefs continue to be fit for purpose and that taxpayer money is effectively targeted. A consultation was carried out and the Government announced at the Autumn Budget 2021 that it will reform R&D tax reliefs to:
- Support modern research methods by expanding qualifying expenditure to include data and cloud computing costs.
- More effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK.
- Target abuse and improve compliance.
At the end of last year, the Government published its R&D Tax Reliefs Report outlining the key changes it proposes to make and inviting further responses by 8 February 2022.
At Beavis Morgan we see how valuable the R&D tax relief scheme is to our client base and are committed to engaging with the Government on its review to ensure the opinions of ourselves and our clients are considered.
We welcome the decision to expand qualifying expenditure to include data and cloud computing costs. This modernisation will ensure the reliefs better incentivise cutting edge R&D methods which rely on vast quantities of data that are analysed and processed via the cloud.
We would like some further consideration on the proposals to refocus the R&D relief towards innovation in the UK. Excluding subcontractors based outside of the UK and Externally Provided Workers who are not on UK PAYE would significantly restrict the R&D benefit of many businesses. It does not fit with “Global Britain” and many companies utilise international services for quality and expertise not available in the UK. Exemptions and the exact detail of this proposal is being considered so we hope the impact of this reform will be minimised.
In the proposed changes to target abuse and improve compliance, the Government proposes that companies should provide more information when making claims, that claims should all be made digitally and that the intention to claim must be notified in advance. We recognize and welcome changes to stop any abuse of the scheme including greater scrutiny and providing sufficient documentation and detail.
However, we feel that requiring advance notification would greatly impact legitimate and eligible claims and have raised our concerns to HMRC. It is well recognised that only a proportion of eligible companies make R&D tax claims. The need for advance notification would restrict our ability to give our clients professional and valued insight on utilising the scheme, many of whom have had insufficient support on R&D claims in the past. This unfortunately would penalise the many companies we encounter who have eligible activity but have not had access to proper advice on R&D previously or were unaware their activity qualifies.
The legislation is too complexed for all businesses to realise exactly what is eligible within their company without seeking external and specialist advice. We cannot expect every business to know the existence of the scheme and the legislation on what qualifies in order to give advance notification. Many eligible businesses would simply miss out on their entitlement to claim and will lose out on valuable R&D tax credits to further their R&D investment.
We look forward to continuing to engage with HMRC through these reviews and as part of the R&D Consultative Committee. We are also committed to keeping our client base up to date with and we expect the draft legislation on these changes to be published in Summer 2022 before the final legislation takes effect from April 2023.
With the proposed changes, especially the potential requirement for advance notification of an R&D claim, we strongly encourage all businesses to assess their eligibility with our R&D specialist team as soon as possible whilst businesses can claim back R&D tax credits for their previous two years.
Please do get in touch if you wish to discuss how these changes may impact your business or to discuss anything else relating to an R&D claim.
You can get in touch with Rebecca Heap via email Rebecca.heap@beavismorgan.com or visit our website: https://beavismorganrandd.com/
Recent Projects:
| Business | Project | Tax Benefit £ |
| Motorsport Engineering | Design and manufacture of automotive components | 575,000 |
| Architect | Design utilising modern methods of construction | 89,000 |
| Sports Science | Scientific studies for injury prevention and head injuries in elite sport | 399,000 |
| Construction Consultancy | Innovative software solutions for construction | 152,000 |
| Self Storage | Software development and data analytics | 31,000 |
| Surface Coating | Design and application of high performance surface coatings for renewable sector | 241,000 |
| Advertising Agency | Creative and technical innovation in digital marketing and events | 99,000 |