BIA response to R&D tax relief advance clearances
BIA submitted our response to a HMRC consultation on R&D tax relief advance clearances.
The consultation sought views on the use and functionality of these clearances for UK R&D, with the aims of reducing error and fraud, increasing certainty for customers, and improving customer experience. The BIA welcomes this consultation as R&D tax reliefs offer essential support for pre-revenue life science companies, and the advance clearance initiative has the potential to address a number of the key issues currently faced by the reliefs - as outlined by the aims above.
In our response, we say:
- For life science companies, being able to obtain certainty via advance clearance for specific aspects of a relief claim – such as SME status, Research Intensity calculations, and contracting or overseas expenditure – is more useful than having to focus on the claim as a whole.
- An effective pre-claim advance clearance facility on these specific matters of technical uncertainty would be preferable to either a pre-activity or post-claim system.
- The advance clearance system should be mandatory for some, provided that it’s deployed to counter genuine concerns around sector-based abuse. For example, in those sectors that have high instances of non-compliance or have been targeted by no win/no fee advisers. This could be complemented by a voluntary scheme for complex R&D claims or in situations where greater certainty is needed ahead of an investment.
- To combat non-compliance, R&D tax reliefs could include a minimum exposure threshold of £25,000. This could be complemented by start-up grants targeted towards specific science and technologies to avoid excluding any early-stage claimants with genuine R&D activities. The impact of any threshold should be monitored post-implementation.
