A consultation and a call for evidence published by HMRC this month give you the chance to express your views on the R&D claims process and demonstrate whether Enterprise Management Incentive Schemes are helping SMEs as intended. Shona Barker explains.
It is a truth universally acknowledged, that a company that hires a good tax advisor, must be in want of legitimate tax planning advice. For many small companies, R&D and share schemes have always been easy wins. Do what you do best and wanted to do anyway, and the Government will send you some free money. Give your employees equity in the future after they have proven themselves to you – and get relief for both them and the company.
But could those halcyon days now be at risk? What is HMRC planning?
Stay innovative, stay at home
R&D has come under reform in recent years, with a PAYE cap imposed from this April to ensure that companies carrying out the bulk of their economic activity abroad cannot access the full generosity of the R&D SME scheme.
The latest consultation on R&D, launched on budget day 2021, asks questions about how much R&D companies are carrying out overseas and how the Government could distinguish between work that needs to take place abroad, which benefits the UK, and that which doesn’t. There’s a subtle Brexit-y undercurrent of British jobs for British workers.
Interestingly, the consultation asks about the format of the current claim process. And how much support have taxpayers enlisted from professional advisors? How could HMRC improve the process? And should the two existing R&D schemes continue to be separated? At present, SMEs and large companies access different levels of relief. Regardless of size, a tax advisor is typically needed to guide a company through the complexities of a claim – at least for the first year, if not on an ongoing basis. Any simplification could be welcome news for companies – providing of course a reduction in difficulty doesn’t come with a disproportionately corresponding reduction in relief.
This is a very wide-ranging document that builds on previous consultations but has a distinct feeling of fishing for ideas. What would you like the future of R&D in the UK to look like? HMRC isn’t sure, but it might get a lot more local.
Sharing is caring
A call for evidence, also launched on Budget Day and also very wide-ranging, tackles the future of Enterprise Management Incentive (EMI) schemes. EMIs, like R&D, are very popular with companies that can access the relief. An EMI scheme will allow you to motivate employees with the right to acquire shares later down the line – whilst providing them with tax advantages. It will also make it easier for you to handle a ‘bad leaver situation’ if the job does not work out for both parties.
The call for evidence asks whether you think EMIs actually help SMEs to recruit and retain employees, whether you use any other share schemes to reward your employees and whether more companies should be eligible to participate. If you have found a share incentive scheme to be instrumental in retaining your best staff or, conversely, if it’s been harder for you to recruit when competing with employers who do offer share incentive schemes, you should make your experiences heard.
Speak now, or forever hold your peace
The advantage of contributing to a HMRC process via an advisor like us is that we can anonymise your comments so that HMRC can’t link them to your company. Even if you are not an existing PKF client, we would be happy to have a chat about your views on R&D and EMIs on a confidential basis.
As both the consultation and call for evidence are still open, this is a golden opportunity to influence the changes HMRC will bring in next. If you would like us to consider your views in our formal response to HMRC, please contact us by 11 May 2021 so we have enough time to incorporate your thoughts.
This article was written by Shona Barker from our London office.
As part of the budget this month, the government announced new capital allowances in the form of a “super-deduction” and 50% first year allowances in an attempt to increase investment over the next two years.