Application is complex, says expert
Firms ‘won’t find R&D tax credit easy to access’
An initiative by the UK tax authorities to encourage smaller companies to claim for research and development tax relief is almost certain to disappoint them, according to one of the UK’s leading tax credit specialists.
Jumpstart has questioned whether the new Advanced Assurance scheme would actually make applications for R&D tax credits any easier for time-pressed SMEs.
Advanced Assurance was introduced last month for companies with less than £2 million turnover and fewer than 50 employees. If the companies qualify, the first three years of claims would be allowed without further enquiries.
Richard Edwards, director at Jumpstart, said: “While we welcome any attempts to make the R&D Tax Credit application process easier, the details required from SMEs under Advanced Assurance remain potentially complex and time-costly.
“It certainly is not the light-touch route that many in the sector expected.”
Mr Edwards explained that Advanced Assurance requires applicants to submit a detailed overview of:
* The proposed R&D activity the company plans to undertake;
* The scientific or technological advance being sought;
* The scientific or technological uncertainties involved;
* The plan for dealing with those uncertainties;
* The reasons why the knowledge being sought is not readily deducible by a competent professional;
* A breakdown of the R&D costs.
Mr Edwards said: “SMEs are time-poor and, although they may be clear on what they consider to be R&D, they typically are not familiar with HMRC’s definition, or the 500 pages of guidance HMRC has produced.”
Although HMRC guidance states that SMEs will “have an HMRC specialist to help you comply”, Jumpstart questions how the resource-starved Revenue will find time for “hand-holding”. It also raises concerns about the knock-on effect on non-Advance Assurance cases.
Mr Edwards concludes: “We have no wish to cast doubts on genuine efforts to improve the application process and we welcome HMRC’s attempts to do so.
“But the fact is that, under Advance Assurance, HMRC is requiring companies to have a good understanding of its jargon before they engage with them. It would have been more helpful to move this assistance even closer to SMEs by allowing them to call in to discuss what the highly generic guidance means in practice.
“As it stands, the load is still on SMEs to read, understand and apply HMRC’s guidance before HMRC will really engage.”