Ian Davie
Senior Consultant
The biannual meeting of the RDCF (Research & Development Communication Forum) occurred on 7th December, which is an opportunity for HMRC to communicate with R&D tax agent providers.
It also provides agents the chance to ask questions around policy, process, technical matters and changes to the SME and RDEC schemes.
With so much happening in the media, increased compliance checks, fraud prosecutions, parliamentary committee meetings and changes to the schemes’ rates in the budget, it was expected to be quite a lively meeting.
The biggest snippets of information we learned were around the intended future amalgamation of the SME and RDEC schemes, how to support the SME R&D intensive companies, and the new G-Forms for digital submission.
It was mentioned that there will likely be an announcement in Spring Budget 2023 of the intention to combine the SME and RDEC schemes and the combined rate into a single above the line type scheme later in 2023, which in style will be similar to the RDEC scheme as it is now.
Details of how it would operate were not discussed but they will be consulting industry on this. Sub-contracting will be of key interest in the combined scheme.
The intention for this was apparently in the Autumn statement 2022, but having traced back over past statements, it has not been mentioned.
As part of the recent changes to the SME scheme which will take place in April 2023 are as follows:
This will have a massive effect on the benefit that SME’s can claim on their eligible R&D spend. For SME R&D intensive businesses that are spending heavily on R&D and cashing in losses, the benefit will drop from 33% of spend to 19%.
A company spending £500k on R&D will now get back £93k instead of £167K. Though if they are accessing grants then the RDEC benefit increases by 50%.
There appears to be an intention to provide some additional support for these SME R&D intensive businesses, though no details were forthcoming, but this will not increase levels of R&D support spend overall.
HMRC were also going to present their proposed digital platform, which we learnt they have called ‘G Forms’, intended as a portal for R&D claims.
The plans are to have this up and running in 2023 with the ‘G Form’ intending to standardise the format for reporting R&D.
TBAT asked eight questions, of which four were raised in the meeting:
A summary of the reply was that a company should be able to demonstrate even if another company has made the advance and not told anyone. You should be able to demonstrate that in your case and how your specific advance is still an advance in science and technology. This is a difficult area to demonstrate and talking to an R&D tax agent can help, as it is complicated.
HMRC’s ambition is to return to 95% of claims processed in 28 days asap, but with the processing peak in December and reform changes due to land, the intention is to continue to hit 80% processed within 40 days in the short term. Remember if you are seeking a repayment, add two weeks on top of that for payment processing.
Pre-registration will provide HMRC with some information on claim, which could result in a “Are you sure?” letter. This will also stop agents encouraging claimants to make fraudulent claims going back two years.
ONS R&D data has always been less than HMRC R&D eligible costs.
ONS’s methods have not been changed since the 1980s; they have now revamped their process and their new estimates appear to align with HMRCs figures, though HMRCs figures do not include R&D in grants, capital expenditure, arts and social sciences, so still some significant differences between the two sets of data.
The expectation is that overall company R&D spend will increase from £37Bn in 2020/21 to £60Bn in 2027/28.
The presentations from HMRC did not tell us much other than what is in the public domain. Though we did pick up a few snippets of new information:
We await to see what the digital G Forms look like, and how a unified scheme, similar to the RDEC, will operate next year.
I still disagree with pre-registration as it stops genuine companies doing good R&D going back 2 years to make a claim. If there are some simple details of what the R&D is, then fraudsters will work out they can put down some great R&D projects to get round this step.
Fraud is the biggest issue facing HMRC and the reputation of the scheme. This will not be tackled by rates changes or pre-registration, only by HMRC correctly policing the scheme and dealing with the fraudsters.
With HMRC thinking they are up to date on processing claims in 40 days, TBAT have a number of clients that submitted in June or before where claims are yet to be processed, so we don’t think HMRC are up to date.
Explore TBAT Innovation's latest insights on HMRC’s R&D statistics, highlighting key trends in R&D tax relief claims, compliance, and the measures introduced to reduce error and fraud. Learn how TBAT’s expertise supports businesses in navigating these changes and ensuring their R&D claims are compliant.
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