UK200Group members discuss HMRCs new Advanced Assurance Scheme for SMEs
Members of the UK200Group of independent accountancy and law firms have commented on the government’s new Advanced Assurance Scheme for SMEs seeking research and development (R&D) tax relief.
From November 2015, small-to-medium-sized enterprises (SMEs) with a turnover of less than £2m and fewer than 50 employees that are first time claimants will be able to receive advance assurance on R&D tax relief. This new scheme will be applied to those that have already undertaken R&D, and also those intending to do R&D.
Under the new measures, published yesterday by HM Revenue & Customs (HMRC), applicants using the Advanced Assurance Scheme will be automatically allowed their first three years of R&D tax relief claims without further enquiry, providing them with greater certainty and allowing them to plan more effectively.
R&D tax relief allows companies to reduce profits liable to corporation tax by up to 230 per cent of their qualifying R&D expenditure.
Recent statistics released by HMRC showed that the number of SMEs claiming tax relief in 2013-14 increased by around 19% to over 15,000 with the total amount of support provided to SMEs totalling £800m.
Andrew Jackson, head of tax at UK200Group firm Fiander Tovell LLP, said:
“R&D tax relief is a very useful aid to innovative SMEs, and the repayable tax credit in particular can be an invaluable source of funding. This drive to make it more accessible is therefore very welcome.
“At present it often seems that claims for relief are made after the event, rewarding companies for having carried out R&D that they intended to do anyway rather than incentivising them to do more. This seems to be largely due to companies not being aware of the relief, and so HMRC’s new Advance Assurance scheme should hopefully be very useful, if it is accompanied by proper publicity.
“Another issue for very small companies is that the cost of advice can make a claim uneconomic, especially where it is not clear that relief will be available – the cost of reviewing whether a project qualifies is not directly proportional to the eligible costs. If they are able to essentially get free advice from HMRC, which may help such companies. There are possible concerns over whether HMRC will be able to advise effectively, but given sufficient resources and the will to do so it should be achievable.
“I note that the roadmap shows issues still being resolved in 2017 and later. If these could be accelerated the effects could be greatly enhanced – informing small businesses in 2015 that they can claim, but not giving them templates and guidance until 2017, will rather dilute the impact of the 2015 publicity and may lead to SMEs writing the relief off as too difficult to obtain in practice.
“One area which doesn’t seem to be addressed is the interaction with grants and other state aids. This is a very confusing area for some SMEs, and closer working between HMRC and Innovate UK and other grant-awarding bodies could pay dividends.
“While HMRC are looking at the regime, another area which might stand some further work would be to allow the tax credit to be reclaimed in real time. At the moment the repayment comes only after the tax return is submitted, which cannot be until after the end of the company’s financial year. This means the repayment comes at least several months after the cost is incurred, and possibly over a year. Allowing companies to make interim claims – perhaps on the model of the quarterly instalments for large companies – could provide a good cashflow boost for start-ups.”