This week we bring you news about new Guidelines for Compliance in relation to R&D tax relief claims and read HMRC’s email about new letters being sent in relation to R&D tax relief claims. HMRC has also published updated guidance on refunds of Section 455 tax on loans made by close companies to participators/associates, and, as previously advised, 23 November 2023 is the date by which action must be taken in respect of certificates of tax deposit. The latest Employer Bulletin is available which includes a timely reminder on reporting PAYE information in real time when payments are made early at Christmas and the November 2023 Agent Update has been published. HMRC performance statistics are now available for the quarter end September 2023 and HMRC has also recently launched a new marriage allowance tool.
R&D Guidelines for Compliance
On 31 October, HMRC published several Guidelines for Compliance (“GfC”) to help potential claimants check if work qualifies as R&D for tax relief purposes. References to claims for tax relief in the GfC mean either:-
According to HMRC, the examples included therein aim to help companies understand general principles that apply to all R&D claims and have also been designed to help avoid common errors made when identifying and submitting R&D relief claims.
The GfC’s objectives are therefore to assist claimants to:-
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find out if work may qualify as research and development for tax purposes;
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understand HMRC’s expectations of those making claims;
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better understand HMRC’s view of who is considered a competent professional;
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be able to judge if a project is seeking an advancement in science or technology;
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understand the meaning of ‘scientific or technological advance’ for tax purposes;
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decide where the project begins and ends for the purposes of an R&D claim; and
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understand the level of evidence relating to a qualifying project that HMRC may want to see.
According to HMRC, the publishing of these GfCs is an indication of HMRC’s commitment to improve and publish guidance that helps and supports claimants. In the coming months, HMRC is aiming to introduce further new guidance for potential R&D tax relief claimants.
HMRC has sent the below email to Chartered Accountants Ireland which sets out details of new letters being sent out in relation to R&D tax relief claims which HMRC believes to be incorrect. Read the email below.
Email to Chartered Accountants Ireland
One element in this is the use of paragraph 16 of schedule 18 to Finance Act 1998 where it’s appropriate for us to do so.
“16(1) An officer of Revenue and Customs may amend a company tax return so as to correct–
(a) obvious errors or omissions in the return (whether errors of principle, arithmetical mistakes or otherwise), and
(b) anything else in the return that the officer has reason to believe is incorrect in the light of information available to the officer.”
We are correcting returns to remove Research and Development (R&D) tax relief claims where there is reason to believe they are incorrect, based on the information available to us. In these circumstances HMRC issues letters to help customers understand the reasons why we believe an R&D tax relief claim is not valid. This is aimed at claims where we’ve received information about the claim, but we believe it to clearly not be a valid claim (where there is any uncertainty an enquiry will remain the best option).
We wanted to highlight this approach to you in case you have had questions from your members.
Additionally, we would also like to inform you of two letters the R&D Anti Abuse Unit (AAU) will be issuing imminently in response to claims being received that have a high risk of being invalid based on the information available to us:
The first letter will be issued where we suspect no advance in science or technology has been sought by the business, but where they may be advancing their own state of knowledge only.
The second letter will be issued in similar circumstances to the above but where the company is in a specific business sector where we wouldn’t normally expect R&D for tax purposes to have taken place, for example, hairdressers, beauticians, and personal trainers. Whether a company is in a specific business or trade sector is not the only consideration. This information is used in conjunction with other methods of identifying the correct customer base, so that we can reach as many companies as possible who may be approached by less than scrupulous R&D sales agents.
Both letters will request that the claimant reviews HMRC’s R&D tax relief guidance to see whether the activities they have claimed does qualify for relief. After reviewing the guidance, if the claimant finds that their activities does not qualify, they will be asked to amend their return with the R&D claim removed. If the claimant still believes they qualify, the letter will ask for them to provide further information to evidence the claim.”
Why are we issuing these letters
Reinforcing HMRC’s commitment to tackle error and fraud in the R&D tax reliefs system, the Anti Abuse Unit was set up in July 2022. The team’s aims include increasing compliance activity to quickly and effectively identify deliberately incorrect claims. The AAU also aims to increase HMRC’s efforts to educate, encourage and facilitate genuine businesses to get it right first time, reducing error as well as tackling abuse.
These letters are intended to both educate and reduce error, by informing businesses of the correct meaning of R&D for tax purposes, and tackle abuse of the system by ensuring clearly unqualifying claims are scrutinised."
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electric charging of company cars and vans at residential properties;
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property business arrangements involving hybrid partnerships – Spotlight 63;
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second-hand motor vehicle VAT margin scheme deadline extension;
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electronic sales suppression a year on: HMRC continues clamping down on major till fraud;
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tips for when you must use post; and
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the Income Record Viewer’s coding data extension from current year-only to include the previous 4 tax years.
We recently notified readers that at a recent meeting HMRC advised that although the marriage allowance online form is not currently mandatory, using the form may mean that claims are processed quicker. HMRC has now launched a new tool to help taxpayers calculate their potential tax saving if they claim the marriage allowance. Both parties to the relationship will need their national insurance numbers to use the tool which only works in simple cases.
If a taxpayer is in receipt of other income such as interest, benefits in kind or dividends, they will not be able to use the tool and should instead call the Income Tax helpline.
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