R&D Tax Relief: Latest News
Research & Development (“R&D”) relief is available to companies that engage in projects that seek an advance in science or technology.
Where available, the relief provides assistance in the form of a reduced tax bill or a repayable tax credit, calculated by reference to the level of expenditure incurred by the company on research and development activities.
Carry on reading for some of the latest developments in the world of R&D relief.
Not sure what R&D Relief is?
You can read more about R&D relief and when it applies by visiting the Research & Development page of our website.
PAYE & NICs Cap
As announced in the 2018 Budget, for accounting periods beginning on or after 1 April 2020 the R&D tax credit will be restricted to three times the company’s total PAYE and NICs liability for the period.
To clarify – the whole of the company’s PAYE and NICs liability will count towards the cap, not just the part which relates to staff involved in R&D activity.
HMRC published a consultation in March 2019 regarding the new restriction and has stressed that genuine companies are not the intended target of the cap. Several potential measures to mitigate the cap have been suggested by HMRC, including:
- The cap only applying for tax credit claims above a specified threshold (not yet defined)
- Allowing group companies or connected parties to combine their PAYE and NICs liabilities when considering the cap
- Enabling companies to carry forward losses that have been limited as a result of the cap
- Allowing companies affected by the cap to access the rest of their payable tax credit when they’ve built up sufficient PAYE and NICs liabilities in future years.
Under the current rules, there is no record keeping requirement specifically for the purposes of claiming R&D relief, with HMRC officers encouraged to be flexible in considering what records are relevant for the purposes of reviewing claims.
In light of this lack of a formal requirement/process, some companies have been providing HMRC with either too little information, or too much irrelevant information.
To counter this, and to improve consistency between claims, HMRC has developed an R&D Digital Form whereby companies can provide both quantitative and qualitative data relating to their claims.
Whilst these forms are not mandatory, they demonstrate the level of information that HMRC expects in order to support a claim and companies should consider utilising these forms in order to prevent enquiries going forward.
Delays for Processing Claims
HMRC’s target deadline for processing R&D claims is 28 days, however the most recently published processing times (as at 8 July 2019) are almost 100 days for R&D tax credits and 200 days for RDEC claims.
The CIOT has written to HMRC to express their concern regarding the extent of these delays and asked them to explain the reasons for the backlog.
HMRC has responded by confirming that it is taking steps to help reduce the delays in both R&D payable tax credits and RDEC claims, including redeploying staff from other areas and recruiting new staff.
Trick or Treat? Tax Highlights from Budget 2018 (29 October 2018)
Advance Assurance for R&D Claims (7 October 2015)