Five R&D tax questions we’d love to ask HMRC

Over the past few months we’ve spent a huge amount of time digging into the nuances of the new merged R&D tax relief schemes, while delivering training sessions and webinars to help our customers and wider audience transition to the new rules.

What’s become very clear is that the same frustrations keep surfacing – gaps, contradictions, and grey areas that make it harder to prepare claims with confidence. These aren’t edge cases. They’re fundamental operational questions that accountants and advisers are running into every day, and the reality is that HMRC hasn’t provided enough clarity yet for anyone to answer them definitively.

Here are the top five R&D tax questions we’d love to ask HMRC, and get real answers to:

1. How much information is enough information for pre-notification?

This question comes up more than any other, and yet we’re not sure what the right answer is! We’ve had some very basic feedback about what HMRC would see as not enough information, but very little about what would be enough! The guidance asks for a high-level summary of activities, but this could be interpreted in a number of ways and could depend on the project stage – filling in the Claim Notification Form (CNF) at the outset of a project would necessarily result in a different summary than that which could be given after the end of the project.

We’d love to see more information about exactly what HMRC wants to see in a CNF, and what this information is being used for.

2. Will NI ERIS claims be more likely to receive compliance checks due to the complexity?

We’ve spent a lot of time thinking, talking and puzzling over the NI rules recently, particularly the interaction between R&D tax relief and the de minimis aid limits. We’d, along with a lot of our clients, love to know whether this additional complexity will make these claims more likely to be a target for HMRC’s compliance activities.

3. Why is the pre-notification deadline 6 months after the end of the accounting period?

This question comes up a lot with our clients, especially those who have missed a claim due to missing the requirement to pre-notify! It would be great to get more understanding from HMRC about why the deadline was set at six months from the end of the accounting period, and not, for example, nine months to align with the tax payment deadline, or twelve months to align with the CT600 submission deadline. The choice of six months seems arbitrary and appears to be catching out a lot of legitimate claimants.

4. Why would a company want to split their claim across RDEC and ERIS?

Under the new rules it’s feasible for a company that qualifies for ERIS to split their claim across both ERIS and RDEC. We’ve written about this before, but are still puzzled as to why this would be a beneficial thing for a company to do. Alongside this, we find ourselves wondering why HMRC have structured the Additional Information Form (AIF) so that costs have to be split into RDEC and ERIS on a project-by-project basis, when there nothing about the projects that makes them ERIS or RDEC – the decision to split is an accounting decision and doesn’t relate to individual projects at all.

5. What’s a good reason to do R&D overseas?

The last of our hot topic questions is about overseas R&D. Much as HMRC have published helpful guidance about the circumstances under which it would be considered to include overseas R&D costs in a claim, these are very broad – CIRD151000 even states that the lists given are non-exhaustive. We’d love to talk to HMRC about how they will view companies claiming exemptions to the overseas costs restrictions, what kind of conditions will actually be seen as acceptable, and whether claims including overseas costs will be more likely to be selected for compliance checks.

Want more practical clarity on the new rules?

The merged R&D scheme was meant to simplify things, but these questions (which are not exhaustive) show how much uncertainty still sits beneath the surface. Until HMRC provides clearer, more consistent guidance, accountants and advisers are left to make their own judgement calls – and the risk of getting it wrong hasn’t gone away.

In the meantime, we’ll continue analysing the rules and sharing what we learn. If you’re dealing with the same sticking points within your firm, feel free to check out our blog, ebooks and on demand webinars. Or, why not get in touch below, and we’ll add you to our monthly mailing list, where you will receive up to date summaries of our content and invites to our webinars and events directly into your inbox.

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