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The response does not disappoint and in fact enhances the benefits of R&D investment in the UK.
A summary of the responses can be listed as follows:-
- The government has been persuaded that a move to Above The Line (ATL) would improve R&D relief by increasing visibility and certainty, and attract increased amounts of R&D to the UK, as well as providing a relief for loss-makers;
- The government recognise that Qualifying Indirect Activities (QIA) relief is a valuable part of a large number of companies’ claims and intends to retain the relief. In addition HMRC will look at ways to improve the current guidance to ensure that companies have greater certainty about what activities qualify. This is a welcomed step forward as some companies have steered clear of this relief due to in ambiguity of what activities qualify;
- The government will continue to review a workable solution in respect to sub-contracting to allow subcontractors to claim the large company credit. The current system of either the certification process or joint election process (or alternative process) do not provide a universal workable solution;
- There will not be any additional reforms to the schemes as a consequence of the removal of the PAYE/NICs cap;
- The government accepts that a move to criteria based on the EU definition of a “company in difficulty” would not be more effective in ensuring the SME scheme remain EU compliant. Therefore they will continue with the “going concern” definition which is declared in a company’s published accounts.
- In summary the response from the HMRC provide some very encouraging enhancements to an excellent scheme. Clearly the intention is to keep Britain investing and developing products, processes and in-house software solutions. The move to an Above The Line (ATL) reporting of the R&D tax credit makes it very visible to the operating functions which will help influence investment decisions.
Do you undertake qualifying R&D, why not contact us and discuss your products and processes.