Technical update: R&D consultation 2021

Published: Monday 17 May 2021

R&D tax incentives have been around since the year 2000, and since their introduction, they have provided extremely valuable support for UK companies developing new products, processes, and capabilities. 

The level of support provided through these incentives has been ramped up substantially since their first introduction - the additional tax deduction was 50% of qualifying expenditure in 2000; it is now 130%. Consequently, their popularity as a source of funding has increased significantly, and we have seen a huge influx of R&D advisers enter the market in recent years, of varying quality.

In the March 2021 Budget, a consultation on the UK’s R&D tax reliefs was announced. This was most likely prompted by a number of factors:

  • Some of the definitions and areas covered by the existing incentives have not kept pace with technology changes and the way that R&D is now undertaken by some businesses. Whilst there have been previous consultations on specific points, the incentives would probably benefit from an overhaul to ensure that they remain fit for purpose;

  • The current R&D incentives schemes were largely shaped by a need to ensure compliance with EU Regulations. With the advent of Brexit, there is now an opportunity to re-shape and simplify the rules for these incentives;

  • Due to the increased popularity of the R&D tax incentives, and the proliferation of advisers promoting them to a huge variety of businesses, the Government is keen to ensure that this support is appropriately targeted, so that taxpayers’ money is spent on activities that will give the most benefit to the UK economy

  • There have unfortunately been an increasing number of cases of abuse of the incentives, and a large number of advisers are also increasingly ‘stretching the boundaries’ of what the incentives are intended to support. This has led to concerns by many reputable advisers (including ourselves), as well as HMRC and the Government. Some of the points raised in the consultation are therefore seeking views on how to improve the quality of advice and the working practices of advisers.

We will be responding to the consultation and are keen to collate your thoughts. We would be grateful if you could please take a couple of minutes to answer a brief survey (answers will remain anonymous):

Take the R&D survey

We appreciate your help and if you have any queries on R&D tax credits, require further advice or if you would like to receive a notification from us when the responses to the consultation exercise are published, please contact David Clift at david.clift@hazlewoods.co.uk or call 01242 680000.

Content image: /uploads/team/unknown.jpg David Clift
David Clift
Partner, Innovation Taxes
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