The submission and consultation document are attached, and are available in Adobe (pdf) format. Also attached is an evaluation report of R&D tax credits published by HMRC. The main issues raised in the document are summarised below.
Content
Above the line credit
The most significant response from large companies to the generally question as to how best to structurally improve the scheme was the proposal to move from the current superdeduction to a system which reduced the company’s final tax liability rather than its taxable profits. The Government has said that it is prepared to consult further on this proposal but notes that there are a number of issues around impact, complexity, design and cost/rate.
Qualifying Indirect Activities
In light of the complexities and uncertainties that are perceived to exist over what costs can be claimed, the Government is asking whether the relief for Qualifying Indirect Activities should be retained.
Subcontracted R&D
The Government is consulting on how best to change the rules so that in certain circumstances R&D relief can be given for “routine” activities of a sub-contractor where it would be R&D if it were being done by the customer. The documents highlights problems which may arise in terms of the information flow between customer and sub-contractor in order to establish an R&D claim.
Removal of PAYE/NIC cap
Budget 2011 announced that the PAYE/NIC cap will be removed for the payable credit under the SME scheme. The Government is asking whether there should be any safeguards to ensure that the removal of this cap is not abused.
Going concern definition
Would it be a good idea to reform the going concern definition for R&D purposes so that it is more in line with the definition used for the EIS/VCT schemes?
Technical Team
15 September 2011
