The festive season is well and truly upon us – and it is always a busy time at RandDTax due to the popularity of the calendar tax year. This Christmas newsletter gives a round-up of the major themes we have seen in 2019.
2019 has been another exciting year with the number of companies we have helped fast approaching 1200 and the benefit they have gained over £124 million.
We have also launched a new website complete with some fantastic videos, and a new industry first “giving back” initiative where we commit to providing free first year R&D consultancy for start-up companies and to invest in microfinance through the Fredericks Foundation charity.
There have been a few themes running through the RandDTax “World” in 2019.
Claims processing delays at HMRC. This has been a big problem. But after an intervention by the ICAEW HMRC appear to have altered their processes and improved things. Since September claim processing times have generally been in line with HMRC’s 28-day KPI. This is a welcome improvement, but December will be the big test and for a lot of companies getting their R&D repayments before the end of January will be crucial for cashflow. The best advice is to simply get your December claim in as early as possible.
The cap on R&D Tax Credits. In the 2018 budget a cap was proposed on payable R&D Tax Credits of 3 times the companies PAYE and NIC contributions. This could potentially harm some SMEs who largely subcontract R&D and have little or no payroll. It was put out for consultation. We were a respondent, but unfortunately the election means no decision has been taken on a measure due to become active from 1st April 2020. This uncertainty is unhelpful and just another Brexit side effect.
New software guidelines and enquiry processes. These were published on the HMRC website late in 2018. They have added to the complexity of claiming software related R&D and created a degree of uncertainty which impacts confidence in the claim process. We have massive experience in the area of software R&D claims and a thorough understanding of the new guidelines. In all areas of R&D claims specialist advice is important but none more so than software claims after these changes.
Continued growth in claim numbers and the funding from the R&D schemes. The October release of new R&D statistics for 2017-2018 financial year showed continued growth. The headlines were:
- Over 300,000 claims since the two R&D schemes started.
- £26.9 billion in tax relief or credit since the schemes started.
- The amount claimed in 2017-2018 was almost 20% of the total amount spent on the scheme in 19 years. Indicating the growth in recent years. Almost £5 billion was claimed and this figure will grow as the statistics are not complete.
- In 2016-2017 the most recent fully completed year for statistics 23% of claimants were first time.
- While the figures are not yet complete a reasonable projection suggests a 25% increase in SME R&D claims between 2016-2017 and 2017-2018.
Brexit. No real clarity as to if the R&D rules will change as it remains uncertain as to if Brexit will happen and what form it will take. On this basis the most likely outcome is that a lot of the EU State Aid related rules that restrict the SME R&D schemes will remain in place at least for the short term.
The Election. The two main parties offer a clear choice on company taxation and their policies for the R&D schemes.
Labour wish to increase corporation tax to 26%, scrap the RDEC (Large Company) scheme, and while they have said they won’t scrap the SME scheme they are committed to a review of all tax reliefs which appears to start with the perspective that they don’t like them!
In contrast the Conservatives wish to keep corporation tax at 19%, keep and expand the R&D schemes including increasing the RDEC rate from 12% to 13%, plus help with some of the software related issues already mentioned by including cloud computing and data as claimable activities.
In terms of the promotion of the two R&D schemes, the Conservatives are much more willing to support them than Labour. This is a shame as it was a Labour government that introduced the schemes and Tony Blair deserves massive credit for that. Sadly, we have moved on from the time when all political parties agreed that the R&D schemes were an undeniably good thing.
Hopefully, the next few weeks will end a lot of the political uncertainty. But that is probably as likely as Donald J Trump taking a break from Twitter!
This brings our end of year round up to an end.
All that remains is for all of us at RandDTax to wish you all a Merry Christmas and Prosperous 2020.
The RandDTax Team.