R&D tax relief claims are under increased scrutiny with HMRC currently enquiring into one in five claims, and the First Tier Tribunal (FTT) rejecting some recent claims that have reached the courts.
This is the backdrop for the introduction of substantial changes to the R&D tax relief rules which are now coming into force. It is, therefore, more important than ever that companies gather all the evidence to submit robust and defendable R&D tax relief claims. This reduces the risk of HMRC rejecting a claim as well as incurring potential penalties.
New merged R&D scheme now live
The new R&D tax relief rules came into force for accounting periods beginning on or after 1 April 2024. Your company’s next “new year” is likely to be in the merged regime, so make sure that you are aware of the rules.
The changes include:
Our R&D tax team have recorded a couple of webinars on the changes to provide a high level overview.
Draft HMRC guidance
As many of the major changes revolve around subcontracting, HMRC recently published draft guidance giving their view of the law on this topic. It is a lengthy document with many examples, click here to read more.
In particular, life science companies should note the draft HMRC guidance focusses on many examples where the new rules may apply to subcontracted-out clinical trials conducted overseas. HMRC’s interpretation of the rules is not as straightforward as you may think: please contact our R&D tax team if you want to consider clinical trials in the light of the new rules and how you engage with your Clinical Research Organisation.
And finally
Three recent FTT cases (Flame Tree Publishing, Tills Plus, Get on Board) demonstrate the importance of gathering sufficient and consistent evidence to support why an advance in science or technology has occurred, as well as ensuring your Competent Professionals are suitably qualified. Only one of the companies was successful in the tribunal; the others could not provide evidence of a sufficient quality to support their claim.
Please contact us if you would like further information about any of the above changes or discuss how our R&D tax relief specialists can help you prepare your R&D tax relief claim here.