ATT calls for pause to R&D relief changes 

The Association of Taxation Technicians (ATT) has welcomed a report by the House of Lords expressing concern over proposed changes to the Research & Development (R&D) tax relief rules and calls for them to be delayed while work is undertaken on the wider future of the regime.

The report on research and development tax relief and expenditure credit was published in January by the House of Lords Economic Affairs Finance Bill Sub-Committee. Expressing concern over the level of fraud and error in the R&D tax relief regimes, the report concludes that changes due to come into effect from April 2023 are unlikely to be effective in isolation.

The changes include a reduction in the rate of relief available under the Small and Medium Sized Enterprise (SME) regime, and a requirement to provide additional information when making a claim, and pre-notification of an intention to claim, where no claim has been made in the past three years.

Senga Prior, chair of ATT's Technical Steering Group, said: “While we share concerns over fraud and abuse of the R&D relief schemes, we don't think the Government's recent proposals are the best way to achieve this. Restricting the level of relief available to all SME's is not a proportionate way to target abuse. We feel the best approach to tackle abuse of R&D relief is to do so head on by targeting the minority of advisers behind incorrect or spurious R&D claims. This will prove more effective than simply reducing the relief available to genuine claimants or making it harder for them to claim.”

Recent proposals to replace the existing R&D relief schemes with a new scheme from April next year will add further admin and uncertainty, according to Ms Prior: “Businesses and advisers are concerned about making changes to their processes to accommodate the administrative changes required from this April, when the whole R&D regime could be replaced in a little over a year. We would urge the Government to pause the reduction in the SME relief rate and the planned administrative reforms until there is a clearer picture on the future of the R&D relief regime.”

Acumen's Tax Director, Fiona Ferrol agrees: “R & D relief schemes are a fantastic incentive for encouraging innovation in companies, so we hope HMRC will listen to the concerns of professional advisors, the Professional Bodies and The House of Lords, so's not to discourage innovation. We will be keeping up to date on any changes that may occur as a result of the consultation document released on 13th January.”