Thankfully, some of that confusion is now lifting – and we’re starting to get a better view of what’s going to happen within R&D tax relief over the course of this year and beyond.
New R&D schemes introduced
One positive step was the introduction of two new R&D schemes. The new Merged and ERIS (‘Enhanced R&D Intensive Support’) schemes take effect for accounting periods beginning on or after 1 April 2024.
The Merged Scheme is a mash-up of the old SME and RDEC schemes. It’s largely based on RDEC, but also allows companies to claim for expenditure on limited company subcontractors. It also introduces new rules for subcontracting that attempt to resolve some of the grey areas in the SME scheme. You can learn all about the Merged Scheme in our free online course.
ERIS is more than just the new name for the R&D Intensive Scheme for loss-making SMEs – in fact, as shown by the table below, it’s actually quite different.
| R&D Intensive Scheme | ERIS | |
| R&D Intensity threshold | 40% | 30% |
| Grants & subsidies | SME scheme rules apply | Have no impact |
| Subcontracting rules | Subcontractors can’t claim | Claim vests with company that decided to undertake the R&D |
| Applies to | Expenditure from 1 April ‘23 | Accounting periods starting on or after 1 April 2024 |
Unfortunately, some aspects of ERIS appear to be fairly complicated, such as the special rules that apply to SMEs registered in Northern Ireland.
HMRC recently consulted on its draft guidance for Subcontracting and the restrictions on overseas expenditure on subcontractors and Externally Provided Workers. While this was updated on 27th March off the back of the consultation, it’s not ideal that at time of writing advisors still don’t have access to the definitive guidance.
R&D Industry Standards
HMRC is also running a much larger consultation on raising standards in the tax advice market. The three approaches being considered for strengthening the regulatory framework are:
- Mandatory membership of a professional body
- Joint HMRC-industry enforcement of standards
- Regulation by a Government body
No doubt there will be a lot of debate around this, as each of these models has its pros and cons. However, it’s great to see HMRC focusing on standards in tax advice. This resonates strongly with our own mission, which is to raise standards in R&D tax relief by providing advisors with the training, support and certification that allows them to flourish in a challenging industry.
Speaking of HMRC raising standards, in April they are meeting with us to discuss how our training platform could potentially be used to deploy specialist R&D training to large numbers of people.
R&D Tax Relief Certification
The other point on our agenda with HMRC is to bring them up to speed on our plans for certification, which are continuing to develop.
You could join our first cohort of advisors to take the industry’s first Certification for R&D Advisors starting the process in September. This will be a comprehensive training and assessment programme that’s designed to both give and validate specialist knowledge about R&D tax relief. Join the waiting list today for opportunities to participate in market research and for the chance to be among the first to get certified.
We will be inviting HMRC (and some of the professional bodies) to collaborate with us on the design of this programme, so that they have the opportunity to contribute towards its scope and rigour. It’s our belief that voluntary certification of advisors is a necessary and important part of raising standards and protecting the longevity of the R&D tax relief scheme.
HMRC’s approach to compliance
It seems likely that HMRC will continue to take a hard line with R&D claimants, particularly those within sectors that are less traditionally associated with R&D. We also think HMRC will ramp up its initiative to engage with R&D advisors as it attempts to improve standards and work out where poor quality claims are coming from. This was mentioned at the last R&D Communication Forum (RDCF), although details on how this will work are thin on the ground.
What seems clear, however, is that something fairly substantial has to change. It seems unsustainable that parts of HMRC (most notably its Policy team and the Individual & Small Business Compliance unit) seem to disagree with each other about what constitutes R&D. While the Policy team’s Guidelines for Compliance are positively written and contain many helpful examples, there is lots of evidence to suggest that the ISBC unit is not following this guidance during enquiries. That creates a confusing and frustrating situation for SMEs and their advisors, which cannot be allowed to persist for too much longer.
Related: An Insider’s Guide to R&D Tax Relief Enquiries
The immediate future
For advisors looking for help in dealing with all this uncertainty, The R&D Community provides specialist training and support services to accountants and R&D consultants. We understand the challenges you’re facing in keeping your team and clients up to date on all the changes, and have developed a range of online training courses, webinars and helpful resources that allow you to train your team to an expert level. Learn more about membership.
If you’re a professional advisor with an interest in R&D tax relief, sign up to our mailing list to stay up to date with the most recent developments.
