Research and development (R&D) tax reliefs
Executive summary
- AAT again notes the reference to the government objective of reaching R&D investment equating to 2.4% of GDP by 2027 but as stated before, believes a more ambitious target should be set of ensuring the UK is in the top ten countries for R&D spend by 2027.
- The consultation document states that in some countries, such as the US, "a company can expect to be audited by the tax authorities on nearly any tax credit claim". There is no reason why the same could not be true in the UK. With regard to the responsibilities of agents and the applicant company being better reflected in the claims process, AAT actively promotes member awareness and understanding of R&D tax reliefs and has previously suggested the government consider imposing joint liability on agents and taxpayers.
- AAT notes that the government agrees with respondents to its 2020 consultation on the scope of R&D (including AAT) that there is a strong case for bringing data and cloud computing costs within the definition of qualifying expenditure and trusts this change will be confirmed later in the year. Given the stated ambition of simplification, there may also be some merit in examining the possibility of abolishing Video Games Tax Relief and instead offering a broader R&D tax relief scheme to replace those on offer to the creative industries.
- Although AAT notes understandable concerns about the UK having a very generous position on overseas expenditure that can qualify for UK tax relief, and acknowledges, "There is no provision in the R&D tax reliefs requiring expenditure to take place in the UK" this does not necessarily merit a clamp down.
Related consultation responses
Research and development (R&D) tax reliefs: consultation on a single scheme
We agree that a single scheme would be beneficial. However, it should not neglect the need to provide a targeted higher rate relief to small businesses.
Tax reliefs inquiry
We believe there's room to reform major relief expenditures. We also recommend halving the headline rate of Inheritance Tax and reforming pension tax relief.
Property income review: call for evidence
While we appreciate that a single tax regime for all types of lettings would be simpler, it seems reasonable that different tax regimes should apply to each.
