The enhanced tax relief for expenditure on research and development (R&D) projects is very attractive for small companies. Unfortunately, the rules are not that simple and HMRC keeps changing its guidance, which is contained in the Corporate Intangibles Research and Development manual (CIRD) and a simpler version on gov.uk.
In October 2014 HMRC changed its practice on expenses reimbursed to staff, saying those amounts could not be included in the staff costs related to an R&D project. In October 2016 this guidance was reversed practically back to the position before October 2014. Companies who had already submitted their R&D claims based on the HMRC guidance which existed in this two-year period may have understated their staff costs in their claim.
HMRC are now giving those companies a chance to revise their R&D claims for accounting periods which ended between 9 October 2014 and 31 January 2016. The revised claim must be received by HMRC by 31 January 2018.
Agent Update issue 61 contains a warning for companies who have claimed R&D tax relief since 1 July 2016, as this tax relief is categorised as state aid. Where the claim was for €500,000 or more the company’s details are published on the European Union website titled “State Aid Transparency public search”. Those details include: name of the business, region, trade sector and the amount of state aid received in specified bands. However, it is not that easy to discover information through that website, as the search criteria demands that you know a lot about the type of state aid given before you can find the recipients.
If you would like to discuss any of these issues further do not hesitate to contact DFC Accountants in Cardiff.