Calls for R&D reforms to be paused

The Association of Taxation Technicians (ATT) welcomes a report by the House of Lords expressing concern over proposed reforms to the R&D scheme.

The report, published on 31 January, highlights the need to pause any upcoming changes to the SME and R&D expenditure credit (RDEC) schemes. Some of the changes are due to come into effect this year, while other, more significant reforms are set for April 2024.

Elsewhere in the report, both the ATT and Finance Bill sub-committee underline the risk of fraud and error in the current R&D schemes but conclude that any proposed rule changes will be ineffective in isolation.

The proposed changes due to come into effect in April 2023 include the following:

• A reduction in the rate of relief available under the SME regime.
• Additional administrative requirements, including providing additional information when making a claim and pre-notifying of an intention to claim where no claim has been made in the past three years.

HMRC launched a consultation at the start of January, which proposes merging the RDEC and the SME R&D schemes, set to launch in April 2024. The Government says it aims to change the way R&D works to “ensure taxpayers’ money is spent as effectively as possible”.

Those who wish to comment on the proposal can do so until 2pm on 13 March by emailing RDTaxReliefs@hmtreasury.gov.uk.

Senga Prior, chair of the ATT steering committee, said: “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.”

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