UK and International Tax news
HMRC Launches Further Consultation On R&D Tax Reliefs
Monday 15th March 2021
A further consultation on Research and Development tax reliefs was launched by HMRC alongside the Budget on 3 March 2021 and this follows last July’s consultation on the scope of qualifying expenditures for R&D tax credits.
The two principal tax reliefs available to companies undertaking R&D in the UK are:
- Research and Development Expenditure Credit (RDEC): a payable tax credit (subject to tax) equivalent to 13% of qualifying R&D costs claimed, and
- Research and Development tax relief for SMEs being a 230% deduction of qualifying R&D costs from a profitable company’s yearly profit, or a tax credit worth up to 14.5% of the surrenderable loss of the loss-making company.
In last year’s consultation, views were sought on areas where particular R&D costs ought to be made eligible for relief, in particular in relation to data and software/cloud computing, as well as costs incurred in the generation, processing or analysing of datasets. The Government agreed with many of the respondents that there was a strong case for doing so. Respondents also made clear that there was a strong case for a wider review to ensure that the reliefs remained fit-for-purpose in a rapidly changing R&D environment, that the UK remained a competitive location for cutting edge research, and that the effectiveness of the reliefs is maximised.
The new consultation will explore further with stakeholders the nature of private-sector R&D investment in the UK, how that is supported or otherwise impacted by the R&D relief schemes, and where changes may be appropriate. In particular, it will look at:
- definitions, eligibility and scope of the reliefs, to ensure they are up-to-date and competitive, and that they reflect how R&D activity is currently being conducted
- how well the reliefs are operating for businesses and HMRC, and whether this could be improved
- targeting of the reliefs, to ensure that for every pound of taxpayer support, the value of the beneficial R&D activity is maximized for the UK economy
- whether there is a case for consolidating the two schemes
- other areas of qualifying expenditure that should be included within the reliefs
- what would be the impact on R&D activities of increased relief for capital expenditure
- how much of the R&D activity is subcontracted and how much of that is undertaken outside the UK
The consultation runs to 2 June 2021.
If you would like more information on the consultation, please contact Keith Rushen on 0207 486 2378.Contact Us