Insights into the R&D Consultative Committee
This month, Ron Gibson, our Operations and Technical Director for The Momentum Group provides an insight into aspects of HMRC’s Research & Development tax relief schemes and an update from the recent meeting of the R&D Consultative Committee.
What are the schemes?
In simple terms, this is a relief on Corporation Tax (CT) that may reduce a company’s tax bill (if liable for CT) or in some circumstances, receive a payable tax credit. It enables qualifying companies with no CT liability to benefit through a cash payment, a reduction in tax or other duties due.
There are two distinct schemes.
- The SME Scheme
- Research Development Expenditure Credit (RDEC) Scheme.
Further details of the schemes and who can qualify can be found at www.momentumgroupni.com/claim-rd-tax-credits
What is the R&D Consultative Committee?
This is an HMRC-sponsored forum, which meets twice a year to discuss the operational delivery of the Research & Development (R&D) Tax relief schemes. The membership is made up of agents, professional bodies, delegates from the industry and representatives from HMRC who have policy and operational responsibilities for R&D Tax Credits.
What is my experience?
After over thirty years working in the public sector and involved in policy development, legislation review and strategic management, I made a relatively smooth transition into the world of R&D Tax Credits. My primary role is to meet with companies and to assess their projects/activities against HMRC’s criteria and maintain close contact with the company’s key personnel throughout the process.
How do I approach an assessment?
My approach to assessments hasn’t changed since my very first technical assessment. My first task is to understand what the business does on a day-to-day basis and to identify what challenges each business faces and why? The most important person in this process is the company’s ‘competent professional’. This is the person who knows what is and what is not scientifically/technologically possible. In many cases, what started as a routine trouble-shooting/problem-solving activity has turned into a qualifying project without the company realising it!
In my opinion the most important part of the process is compliance, compliance, compliance! At Momentum we strive to ensure each project is compliant with the current guidelines, each costing applied to a project is compliant with tax legislation boundaries and our interaction with our clients and HMRC personnel is compliant with ethical and good business practice. I am proud of our record at Momentum. We have only had one enquiry from our claims, which resulted in a successful outcome for our client! This has shown me that putting compliance at the forefront is key to maintaining the highest standards.
This is what makes Momentum different from other so-called R&D firms; many activities are not science within the guidelines and commercially innovative isn’t enough to achieve R&D relief. Not every problem or challenge is an uncertainty. However, when a project is identified, the relief offered is substantial and at times can be the difference between businesses growing, surviving or failing. It may look like all R&D firms offer the same service, seeking out the best agent with a proven track record to achieve the optimum result is paramount in the decision-making process for companies considering an R&D claim. At Momentum we make this simple. Companies incur no costs as Momentum work on a no win no fee model based on a successful outcome. This is very important; in the unlikely event of an enquiry arising from a claim, Momentum control the whole process on your behalf.
What issues are arising within the consultative committee?
First and foremost, HMRC are encouraged with the uptake from companies seeking R&D relief. It shows that the UK is being innovative and challenging scientific/technological uncertainty. This is in line with Government commitments to achieve all R&D spending as 2.4% of GDP by 2027 as part of its Industrial Strategy. However, there is a word of warning that in making claims, companies (and in particular, their representatives) need to ‘get real’ about what activities are truly R&D activities for tax purposes. With just over 50,000 claims received to the 12-month period ending March 2018, Mike Crabtree, Head of CT Innovation and Growth, highlighted the potential for ‘system abuse’ for an historically principled structure based on incentive and reward for R&D activities.
What does the future look like?
Whilst a number of guidelines are being updated to reflect changes in technology such as software development, the biggest change in the process will be the introduction of an HMRC digital portal, which will enable Agents to upload projects and costings directly into to the system. It is something I welcome as not only will it simplify the process, but it will ensure the highest levels of compliance and reduce the potential for ‘system abuse’. I am encouraged by the portal and although still in development stages, it follows a methodology we have employed at Momentum for years.
Does this mean R&D relief will continue for years to come?
That question can only be answered by HMRC and Government. In my opinion, R&D tax relief is here for the long term. I do worry that the system is open to abuse from unscrupulous agents willing to cut corners for higher or lower fees. It is not only unfair to the submitting company but also unfair to the professional and ethical R&D specialist firms who take the time to ensure that proper accounting principles and compliance are at the forefront of any R&D claim process.
To find out more about R&D Tax Credits contact Momentum on 028 9140 4030 or send an email to firstname.lastname@example.org