R&D Tax Relief Update

It has been a busy period for R&D tax relief updates. Starting with the Government publishing their National statistics for the year.

Key points show that R&D tax relief claims (and payments) are up 16% on the prior year – driven mainly by SME claims. For the year to 31 March 2020 they estimate nearly 86,000 claims in total  with R&D support (either payouts or tax reductions) of £7.4 billion. Click here to read the full report.

Additionally, there have been a flurry of First Tier Tribunal cases resulting from HMRC challenge as to the validity of the R&D tax relief claim being presented.

The challenges have been on various grounds including whether the project itself is qualifying R&D, the size of the entity (and therefore whether an SME or not) and mechanical aspects of getting a claim into HMRC.

Regardless of the outcome (in all cases there is the right to appeal in any case) this shows the increased spotlight that HMRC are shining on R&D tax relief, particularly on the SME sector.

An R&D tax relief claim is part of a company’s self-assessment tax return. The recent cases reiterate how important it is for a company to maintain records and contemporaneous documentation to support its claim.

 

This includes

• Documenting the science and technological advance and the scientific or technological uncertainties
• Knowing the rules as to what expenditure can and cannot be claimed
• Being aware of some of the complexities and pitfalls such as receipt of grants or subsidies, or the application of the SME cap.
• Ensuring you are claiming under the right scheme (R&D Expenditure Credit “RDEC”) or SME
• Seeing the wider context of the interaction with the rest of the company’s corporation tax return.

James Cowper Kreston have a strong track record in assisting clients and ensuring that they prepare a robust and supportable R&D tax relief claim with appropriate documentation. In the last year or so we have achieved over £20million of tax savings or refunds for our clients.

Take a look at the video below to see how we can help...