Is R&D tax relief too good to be true?

by Ann Minson

The answer is still no, as long as the claim is valid.

Since R&D tax relief’s introduction in 2000, HMRC’s brief has been to encourage claims. For most of its history this has meant a light touch approach for many claimants. That could be about to change though, as the latest statistics for R&D claims made show actual levels of R&D tax relief are now very close to government targets. In addition, there are concerns in HMRC that over £600m could have been incorrectly claimed under R&D tax relief. Meanwhile stories circulate about overly aggressive claims that push well beyond the boundaries of the legislation. 

The first evidence of a harder stance towards claims, is the reintroduction (from 1 April 2020) of a cap on the amount of cash credit that loss making SMEs can claim. This will be limited to three times the company’s total PAYE and NIC, which could have a big impact on companies that favour outsourcing over employing R&D staff. 

A wider issue may be an end to the light touch approach, with more enquiries launched into R&D tax relief claims. Defending a claim can prove costly, not only financially but also in the management time required, so it will be increasingly important that companies  are confident they could justify their R&D claims in the event of HMRC asking questions. 

The SME R&D tax regime is still a great relief and valid claims can result in very valuable cashflow savings for claimants. However, companies need to be wary of overly aggressive approaches from some unregulated specialist advisors; our advice is to bear in mind that old tax adage: “If it looks too good to be true, it probably is.”

Ensors has a wealth of experience making defensible R&D tax relief claims, so if you want to explore whether your company is entitled to claim, please contact one of our experts.

 

Further blog posts on R&D can be found below – 

Author

Ann Minson

View Biography