Parliamentary Committees and Public Enquiries
Lords Committee publishes report on research and development tax relief and expenditure credit
The Economics Affairs Finance Bill Sub-Committee has published its report, Research and development tax relief and expenditure credit.
- Report: Research and development tax relief and expenditure credit (HTML)
- Report: Research and development tax relief and expenditure credit (PDF)
- Inquiry: Draft Finance Bill 2022-23
- Economic Affairs Finance Bill Sub-Committee
The House of Lords Economic Affairs Committee appoints a Finance Bill Sub-Committee each year to inquire into the draft Finance Bill. The Sub-Committee’s inquiries focus on technical issues of tax administration, clarification, and simplification rather than on rates or incidence of tax.
The report covers the Government’s draft Finance Bill 2022-23. The draft Bill was published on 20 July 2022 and the report covers its Research and Development (R&D) tax relief reforms.
The Sub-Committee heard evidence that in recent years there has been an escalation in the abuse of R&D tax relief which has led to a loss of revenue. The relief was subject to large-scale organised criminal attacks and the activities of rogue advisers which involve targeting small companies, often persuading them to make invalid claims. In its most recent accounts His Majesty’s Revenue and Customs (HMRC) estimated the amount of error and fraud in its two R&D schemes at £469 million.
The Bill proposes legislative changes to combat this abuse, including the requirement to provide HMRC with more detailed information about the nature of a claim, naming any tax adviser involved in preparing claims and requiring that claims should be endorsed by a senior officer of the company. It also introduces a requirement to give pre-notification of an intention to make a claim.
The reports main conclusions and recommendations are:
- Legislative changes within the draft Finance Bill 2022-23 are not effective in isolation and that improvements to HMRC’s compliance capability are also required. This includes a more focused and targeted approach to identifying suspect claims, greater expertise and potentially more resource.
- Fraud and error could be mitigated before claims are made if HMRC improved the support it provides to businesses. This includes both its guidance and communications to increase understanding of the scheme and expanding its existing Advanced Assurance process for claims by small and medium enterprises (SMEs).
- The Sub-Committee welcomes the extension of the range of qualifying expenditure for which R&D relief is available to include cloud computing and data licensing costs. It also welcomed the Government’s proposal to include pure mathematics within the scope of the definition for R&D.
- That the Government introduces some form of transitional relief for expenditure on specialised resource, which is not available in the UK, particularly for contracts which have already been entered into.
- BEIS and HMRC should work together on a new awareness campaign aimed at providing SMEs with accurate information about what is, and as importantly, what is not R&D.
Lord Leigh of Hurley, Chair of the Finance Bill Sub-Committee said:
“R&D investment, which tax relief supports, makes an important contribution to the UK’s economy and productivity. But fraud and error are costing the taxpayer over £450million each year.
“HMRC’s plans for tackling this problem will not succeed if it doesn’t also improve its compliance capability.
“The Government should use its review of R&D tax relief as an opportunity to look beyond the initial measures within the draft Bill and hold an open-ended consultation on how the scheme can be improved. This will be integral to future proofing the UK’s competitiveness as a hub of R&D activity.”
Original article link: https://committees.parliament.uk/committee/230/finance-bill-subcommittee/news/185805/lords-committee-publishes-report-on-research-and-development-tax-relief-and-expenditure-credit/
Latest News from
Parliamentary Committees and Public Enquiries
MPs lament NHS and Government complaints body’s “lack of ambition” to return to pre-pandemic service delivery levels31/03/2023 16:05:00
The Public Administration and Constitutional Affairs Committee has today published its report on the performance of the Parliamentary and Health Service Ombudsman (PHSO) from 2021-22.
Universal Credit and childcare costs: Work and Pensions Committee publishes Government Response to Report31/03/2023 15:05:00
The Government Response to the Work and Pensions Committee Report on Universal Credit and childcare costs has been published.
Greater support needed to realise ambitions of the National Bus Strategy, Transport Committee tells Government30/03/2023 17:30:00
The Transport Committee’s new report, ‘Implementation of the National Bus Strategy’ argues that while the Government’s 2021 National Bus Strategy was ambitious, full of good ideas and supported by extra, much-needed funding, the Government must maintain its focus to achieve it and build a network fit for the post-pandemic world with more investment in cashless payments, smart ticketing, priority bus routes and demand responsive services.
Urgent action needed to ensure opportunities of new health care restructure are realised, warn MPs30/03/2023 16:30:00
The Committee’s report into new partnerships aimed at delivering joined-up health and care services is calling for the Government and NHS England to address key concerns if an opportunity to deliver real change is to be realised.
Car parking charges and use of parking apps - Levelling Up Committee writes to Government Ministers30/03/2023 14:25:00
Clive Betts, Chair of the Levelling Up, Housing and Communities, has written to Transport and Levelling-Up Ministers on a series of car parking issues, including the Government’s Private Parking Code of Practice, the National Parking Platform, and concerns that some motorists are being digitally excluded from the phasing out of pay-as-you-go parking meters.
Ombudsperson system needs greater human rights focus but dedicated Human Rights Ombudsperson not needed – report finds28/03/2023 16:25:00
Creating a dedicated human rights ombudsperson could risk creating overlap with the functions of existing bodies, a Joint Committee on Human Rights report has found.
STEM ambitions must be matched by commitment to diversity and inclusion, say MPs24/03/2023 15:20:00
The Commons Science and Technology Committee calls for action on underrepresentation in STEM “that truly moves the dial” in a new report.
National Security and Investment Act: Scrutiny deal agreed between Committee and Government23/03/2023 16:10:00
The Government and the Business, Energy and Industrial Strategy (BEIS) Committee have agreed a memorandum of understanding (MOU). It will give the Committee access to the information it needs to scrutinise the work of the Investment Security Unit (ISU) and the UK’s new system of screening investments for security risks.