House of Lords Call for Evidence into R&D relief

The House of Lords Finance Bill Sub-Committee has launched a Call for Evidence inviting contributions to its inquiry on draft Finance Bill 2022-23 in respect of proposed changes to Research & Development (R&D) relief.

The Call for Evidence invites companies claiming R&D relief, their advisers, business and trade organisations and other interested parties, to submit written evidence to the House of Lords inquiry.

The relevant draft Finance Bill clauses:

• Expand the categories of qualifying expenditure to include data licences and cloud computing.
• Ensure pure mathematics will no longer be an excluded cost.
• Only allow claims for Sub-contracted work and Externally Provided Workers (EPWs), where the work is undertaken in the UK, subject to a limited number of exceptions.
• Tackle abuse by ensuring that all future claims:
  • Must be submitted digitally (unless exempt from online filing).
  • Have a pre-claim filed in advance, notifying HMRC that a claim will be made (unless a claim has already been made in one of the last three periods).
  • Include the details of any agents who have advised on the claim.
• There are also a number of changes to address anomalies and unintended consequences of the current legislation.

The House of Lords sub-committee is particularly interested in the experiences of SMEs claiming the relief and how they expect the changes set out in the draft legislation to affect them.

Call for Evidence questions:

1. Have the changes to the definition of R&D gone far enough in modernising R&D relief, and if not, what more needs to be included?
2. How effective will the changes be in countering error and fraud resulting from spurious R&D claims and is there more that can be done, or different approaches that could be adopted?
3. How successful is the refocusing of the relief in encouraging activity in the UK without adverse consequences?
4. How aware are smaller businesses of R&D relief? Is there more that HMRC could be doing in practice to help smaller businesses access relief to which they are entitled?
5. How helpful is HMRC and BEIS guidance in interpreting and applying the R&D relief rules?
6. What view do you take of the requirement to give advance notification of R&D claims? What effect would you expect it to have on genuine and spurious R&D claims respectively?
7. What is your experience of HMRC’s approach to dealing with claims to R&D relief which it suspects to be invalid, either through misunderstanding of the rules, or fraud?
8. Are there lessons the UK could learn from the tax systems of other countries about how to encourage R&D?
9. How successful are the changes in R&D relief likely to be in encouraging innovation and development?

The deadline for responding to the call for evidence is 2 November 2022. Evidence can be submitted online here or in writing to: Clerk to the Finance Bill Sub-Committee of the Economic Affairs Committee. Committee Office, House of Lords, London SW1A 0PW.

Useful guides on this topic

R&D Tax Relief: Overview
What is R&D Relief? How does it work? Why does the size of the company matter? What is sub-contracted R&D? How do I write an R&D Report?

R&D: SME Tax Credit scheme
What Research & Development (R&D) schemes are available for small and medium-sized companies undertaking R&D? How to make an R&D claim? What are the qualifying costs and how much can be claimed?

R&D: Software
Is software development a qualifying activity for Research & Development (R&D) relief?

External link

Call for Evidence: Draft Finance Bill 2022-23