RDCF Update: July 2022

For those dialling into the Research and Development Communications Forum today hoping for an update on the current state of affairs within the R&D units at HMRC, it will have been a disappointing afternoon.

Overview

Of note was the statistic that the number of claims in F/Y 2022 increased by 10.5% over the previous period. And that 80% of claims are being processed within 40 days (the new temporary norm for processing).  Though they expect this to return to 28 days by the end of summer.

Fraud Investigation

However, gIven the “pause” on repayment of payable tax credit, many were hoping to hear that HMRC had concluded their investigation into “irregularities within the scheme”.  Unfortunately, what we got was not exactly news.  HMRC again referenced the need to investigate submissions more thoroughly, but when asked, gave no clear guidance as to who or what this extra scrutiny was aimed at.  Instead, they tended to decline commenting, citing the reluctance to discuss individual cases.  Furthermore, when asked about the legality of withholding these repayments, there was a candid response from HMRC asking where it was in legislation that they even had to repay it!

Some Positives

That said, it wasn’t all negative.  There was the introduction to a new ARIA fund (Advanced Research and Invention Agency) for innovation which aims to support High Risk, High Reward innovation, and clarification of some of the points first mentioned at the last meeting, most notably the confirmation of the necessity to notify HMRC in advance of making a claim for R&D tax relief.  HMRC reiterated that Coronavirus support packages are not classed as Notified State Aid, and therefore need not affect a claim for R&D. That said….a company claiming support through Coronavirus Statutory Sick Pay, will need to think carefully if any of their staff are involved in R&D as this is being categorised as state aid.

Brexit

And finally, just when we thought we’d “gotten Brexit done”, it goes and raises it’s ugly head again.  Unfortunately, it will linger for a while in the context of R&D tax reliefs.  Whilst HMRC (everyone for that matter) still struggle with the complexities of the N.Ireland protocol, they attempted to point out the differences between grants received before Brexit being Aid as per EU legislation, versus post January 2021 subsidies.  This is something that still needs to be clarified and we will be asking HMRC directly for an explanation on this. But in a nutshell any Grants offered prior to January 1st 2021 still fall under EU legislation.