Contact: Jo Ouvry
Deloitte
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On Wednesday the Chancellor is expected to confirm the introduction of a number of measures aimed at increasing the level of research and development (R&D) expenditure undertaken in UK. This follows proposals announced before last year’s Pre-Budget Report. A key element of the measures expected to be announced is improving the experience for claimants and reducing the inconsistent treatment between individual tax districts, particularly in areas such as software and engineering.

David Cobb, head of R&D tax services at Deloitte, comments:
“Measures expected include dedicated teams to handle claims for SMEs, which it is hoped will lead to greater consistency over the eligibility of claimants for the relief, allowing greater certainty over the value of the tax credit from an investment perspective. These teams are also expected to be provided with new training to help them better understand the nature of eligible work, particularly in the software industry.

“In addition, a statement of practice will be issued providing details of how SMEs can expect their claim to be handled. This should make the claim process easier to follow, as well as speeding up the payment of credits.

“Of great interest to many companies is the possibility that the relief will be extended to expenditure that is capital in nature, i.e. it leads to an enduring asset in the business.  Whilst this is likely to be limited to the categories of costs that currently qualify for the relief, it will ensure that the sort of work the Government is seeking to encourage will be more fully rewarded.

“The time limit for claiming the relief will be reduced from 6 years to 2, aligning it with the deadline applied to cash reclaims for loss making SMEs. Although not necessarily welcomed, this will avoid confusion with the existence of 2 limits and should be accompanied by sensible transitional rules to ensure that past years are not disadvantaged.

“The overall message is that these measures will be a positive improvement to the R&D regime, and if implemented effectively, will be of great benefit to many SMEs. These changes should help to reduce inconsistency over the eligibility of claims, allowing inspectors to make clearer judgements and identify the hallmarks of R&D.”

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Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.