Posted by James Pearson on 18 Nov 2011

Research and Development (R&D) Relief

Her Majesty’s Revenue and Customs (HMRC) has announced a pilot system for making research and development (R&D) claims.

The ‘voluntary advance assurance’ pilot is available for small companies with 50 or less employees who are about to make their first R&D claim.  If the pilot is successful the scheme will be rolled out more widely.

According to HMRC, the aim of the system is to make the claim process simpler and more efficient and involves the applying company and HMRC “agreeing a basis for the first R&D claim and the claims for the two subsequent accounting periods.”

If the basis is agreed then HMRC say that they will “normally” accept the claims as accurate and allow the claims without query, unless a significant issue should arise.  Furthermore, companies that volunteer will be offered one to one support from a designated R&D relief expert who will be able to offer advice on putting the claim together.

Whilst we at Tax Innovations welcome any initiative that makes administering taxation simpler, we advise anybody wishing to use the scheme to do so with caution.

We have achieved great successes on behalf of our clients in claiming R&D relief for activities that HMRC have previously stated as not qualifying and the concern is that business owners will not be better off by volunteering.

Under the current pilot scheme, there is a possibility that one HMRC R&D expert may assess a claim on a different basis than another and so companies may receive differing results, based on who is assigned to them.

Furthermore, by agreeing on the current and last two accounting periods, companies maybe tying themselves into a three year agreement that could result in under-claiming over the entire period.

Essentially, we hope that this pilot evolves into a system that offers the simplicity and ease that it aspires too, but in the meantime we advise that you seek R&D relief advice from a professional tax adviser to ensure that you are claiming for the rightful amount.

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