ATT calls for pause to R&D relief changes
The Association of Taxation Technicians (ATT) welcomes a report by the House of Lords expressing concern over proposed changes to the R&D tax relief rules, and calls for them to be delayed while work is undertaken on the wider future of the regime.
On 31 January, the House of Lords Economic Affairs Finance Bill Sub-Committee published a report, Research and Development tax relief and expenditure credit.1 The report, which cited written and oral evidence provided by ATT 19 times, expresses concern over the level of fraud and error in the R&D tax relief regimes, but concludes that changes due to come into effect from April 2023 are unlikely to be effective in isolation.
The changes include:
- A reduction in the rate of relief available under the Small and Medium Sized Enterprise (SME) regime.2
- Additional administrative requirements, including a requirement to provide additional information when making a claim and pre-notification of an intention to claim where no claim has been made in the past three years.
Senga Prior, chair of ATT’s Technical Steering Group, said:
“We share concerns over fraud and abuse of the R&D relief schemes and strongly support efforts to crack down on such abuse of the tax system and improve compliance. However, we do not consider that the Government’s recent proposals are the best way to achieve this.
“In particular, we do not consider that restricting the level of relief available to all SMEs is a proportionate way to target abuse.
“We agree with the House of Lords report that the administrative changes proposed will not, on their own, reduce the level of fraud and abuse in the R&D relief scheme. Instead we think that, in many cases, they will merely increase administrative burdens for businesses.
“We consider that the best approach to tackle abuse of R&D relief is to do so head on by targeting the minority of advisers behind incorrect or spurious R&D claims. This will prove more effective than simply reducing the relief available to genuine claimants or making it harder for them to claim.”
On 13 January, HMRC and HM Treasury launched a consultation3 which proposes replacing the current R&D relief schemes completely with a new, single scheme from 1 April 2024.
Senga Prior said:
“Taken together, this is a large volume of proposed change for businesses and advisers to adapt to within a short period of time. It also creates an overall feeling of uncertainty and makes it hard to plan.
“Businesses and advisers are concerned about making changes to their processes to accommodate the administrative changes required from this April, when the whole R&D regime could be replaced in a little over a year.
“We would therefore encourage the Government to consider pausing the reduction in the SME relief rate and the administrative reforms planned for this April until there is a clearer picture on the future of the R&D relief regime. To give businesses certainty, and allow them to plan and budget accordingly, a clear roadmap for reform should also be published.”
Notes for editors
- See https://committees.parliament.uk/committee/230/finance-bill-subcommittee/news/185805/lords-committee-publishes-report-on-research-and-development-tax-relief-and-expenditure-credit/.
- With effect from 1 April 2023, the deduction rate for the SME scheme will be reduced from 130% to 86% and the credit rate from 14.5% to 10%.
- See https://www.gov.uk/government/consultations/rd-tax-reliefs-review-consultation-on-a-single-scheme.
The Association of Taxation Technicians
The Association is a charity and the leading professional body for those providing UK tax compliance services. Our primary charitable objective is to promote education and the study of tax administration and practice. One of our key aims is to provide an appropriate qualification for individuals who undertake tax compliance work. Drawing on our members' practical experience and knowledge, we contribute to consultations on the development of the UK tax system and seek to ensure that, for the general public, it is workable and as fair as possible.
Our members are qualified by examination and practical experience. They commit to the highest standards of professional conduct and ensure that their tax knowledge is constantly kept up to date. Members may be found in private practice, commerce and industry, government and academia.
The Association has over 9,000 members and Fellows together with over 5,000 students. Members and Fellows use the practising title of 'Taxation Technician' or ‘Taxation Technician (Fellow)’ and the designatory letters 'ATT' and 'ATT (Fellow)' respectively.