Press Room
Missed opportunity to announce relaxation of research &
development tax relief rules
Today's Pre-Budget Report was a missed opportunity for the
Government to publish R&D tax relief guidelines relaxing rules
on claims for indirect activities, says leading business and
financial advisor Grant Thornton.
HMRC is expected to publish new guidelines to clarify the
interpretation of 'qualifying indirect activities' against which
R&D tax relief can be claimed. This would provide an
opportunity for businesses to increase the amount they can claim
for Research & Development (R&D) tax relief. Indirect
activities are activities required to enable the company to
undertake R&D.*
Contrary to prior practice, HMRC will accept that certain indirect
activities identified in the then Department of Trade and Industry
(DTI) guidelines as 'qualifying indirect activities' can now be
claimed. This will enable businesses, even those that have already
submitted a claim, to include qualifying indirect activities that
may increase the amount claimed, so long as they are within the
statutory time limit.
The benefit of an additional claim will depend on several
factors, including what rate the company pays tax, whether they are
making a small and medium enterprise (SME) or large company claim
and when the costs were incurred. For example, an SME company
making a loss and claiming R&D tax credit will get
approximately 24p cash back per £1 of additional qualifying
expenditure, so £10,000 of additional expenditure will generate
£2,400 cash back.
The statutory time limit for amending a claim is two years from
the end of the accounting period. For example, a company with a 31
December year-end will have until 31 December 2009 to amend their
R&D claim for the year ended 31 December 2007.
Francesca Lagerberg, Head of Tax at Grant Thornton says, "The
Pre-Budget Report would have been a good opportunity for the
Chancellor to announce these guidelines but they did not feature in
today's speech. Previously, when making claims on behalf of clients
we have seen HMRC take a tough stance on R&D tax relief of
late, so we welcome the relaxation we have seen on the rules
governing indirect activities when submitting claims for
clients.
"The extra cash will be a very welcome boost for businesses that
have been adversely affected by current economic conditions and
have found it increasingly difficult to get R&D claims through.
This change of interpretation will also bring HMRC's practices
closer to the former DTI's own guidelines on the definition of
R&D, upon which the relief is based.
"We would urge businesses who have already submitted a claim to go
back and check if they are eligible for further relief as these
changes significantly broaden the scope for claims," Francesca
Lagerberg concluded.
For further information, please contact: Lisa Ritchie, Grant
Thornton Press Office: 020 7728 2208 or email: lisa.ritchie@gtuk.com