R&D tax relief: New anti-abuse rules

As R&D tax relief rules are arguably the most generous on the UK tax statute book, it is perhaps no surprise that HMRC consider that there is much abuse going on. For every £1 that a corporate taxpayer claims as an eligible R&D spend, their corporation tax bill is reduced by 43.7p (ie, not the usual 19p). This potential bounty has led to a new industry of specialist tax boutiques entering the market, who attract business by cold calling prospects, and often over-promising what projects that prospect can claim on. The ongoing tax agent and client then have to pick up the pieces if a claim is investigated and rejected by HMRC, and the tax boutique, who gets paid on a percentage of tax reduced basis, either offers no recourse or is no longer trading.

So, with effect from April 2023, HMRC are seeking to clampdown on such false claims, by considering introducing the following changes:

• All R&D relief claims will have to be made digitally.
• Such claims will have to contain more detail.
• All claims will have to be signed off by a senior named officer at the claimant company.
• All claims will have to include details of the agent submitting the claim.
• Companies may need to inform HMRC in advance (perhaps through a new portal) that they plan to make a claim.

Although these changes may seem onerous, it has long been our recommended best practice to produce and e-submit an R&D Report, in support of a claim to HMRC, along with the company tax return. So no real change in this regard for genuinely eligible claims.

Disclaimer - All information in this post was correct at time of writing.