A Review of Recent Developments in R&D

Mark Morton discusses the recent developments in R&D, ahead of our Tax Update and R&D courses this Spring.

URLS for further information:
Tax Update - What's New for Spring 2025
Research and Development - The Definitive Guide

For more information on this topic and more, please visit www.mercia-group.com for further details.

Transcript

Hello welcome to this podcast. It's Mark Morton here first week of February. The nights are still pretty dark. Some of you will be getting over the torture that was January and self assessment returns. And I was talking to somebody recently and just looking forward to the days of MTD when every client's work profile will be falling at the same time. 

So anyway we're now into February. The nights are getting a little bit longer. And it was just a bit of an update, really, on where the revenue had been going with research and development over the last couple of months. So, we've seen continuing tribunal cases. So, the revenue, in essence, trying to make some test cases on particular points. 

Particularly subsidised expenditure, whether it was subsidised. And the impacts on that on SME schemes historically Also sort of looking at whether the work was contracted out stroke subcontracted out or not and of course the implication being if it wasn't subcontracted work and you were paying a third party Maybe there was no R& D relief at all again. 

So the revenue had been trying to make Some public points interestingly, the two test cases what appeared to be test cases that have been pushed through the courts the revenue lost them both And have subsequently said they won't appeal And quite interestingly as well the points that revenue are making Probably 20 years too late. 

So well done the revenue for eventually catching on, but the points, the revenue making relating to both of those issues are being changed quite considerably in this, what the revenue called emerged. I don't, I don't particularly like that term merge because we we've still got two variations of the R and D scheme going forward, but. 

Looking at those rewritten rules going forward both of those issues are really being addressed. So it's a bit of an odd policy that the revenue want to take issue with an historic issue, and I accept in terms of compliance, if they pick you up, they've probably got, you know, four years minimum. But it seems a little bit odd they would be focusing their resources 20 years down the line on something they could have been asking 20 years ago. 

So a bit strange. Now they're, they're not the only issues. We continue with all sorts of. cases relating to R& D. What we've also seen recently is the revenue, I have to say, the mind boggles at this, but the revenue releasing a disclosure facility for incorrect R& D claims. Now presumably most of you didn't submit incorrect R& D claims. 

As far as you know, so one wouldn't imagine there'll be lots of firms rushing to take up this facility. Of course, if you're at the other end of the spectrum and you've been claiming on behalf of a nursing home well, probably go directly to prison anyway. But fundamentally, I can't believe in that sort of marketplace, the sort of seriously dubious, unsupported claim that the people who've done that are going to be submitting A voluntary disclosure and the companies that have done it I can't believe many of them because they will do what they've been been doing ie what they've been advised to do by the third parties, so I I would love to see the statistics in 12 24 months time Of how many people have voluntarily coughed up and said i'm terribly sorry, you know, this was an incorrect R& D claim So I did find that quite amusing to see launch recently. 

What's quite clear is The compliance will continue for the time being, it will ratchet up. I honestly don't believe that the rewritten rules will address the seriously dubious end of the market anyway. And the sheer volume of claims the revenue is still getting. make it nigh on impossible, you know, to catch all those dubious claims. 

So I do wonder whether we are looking at something more serious at some stage to address the history and of some of these dubious claims, but we shall see. So very much, I think part way through the story as opposed to the end of the story. If you'd like to listen in more detail to any of these cases that have been coming through, or in fact any of the other things that we may be talking about in the spring, we will be running the Spring Tax Update courses in the near future. 

We've also got a, a Research and Development specific course coming up purely online. The Spring Tax Updates will be face to face as well. So anyway hopefully I will see you one way or the other over the next few weeks. Take care, everybody.