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HMRC accepting late R&D claims

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An uncertainty in the treatment of staff costs in claims for tax relief on Research & Development (R&D) expenditure has recently been clarified, which means that HMRC are allowing certain claims to be amended outside the normal deadlines. However, the window is closing soon, so action should be taken now.

R&D claims allow a company directly engaged in overcoming scientific or technological uncertainties to claim additional tax relief. This doesn’t necessarily mean you have to have scientists in white coats in a laboratory, claims can potentially be made by any business that is creating, or attempting to create, new or improved products or processes.

Only certain expenditure qualifies, one of these being ‘staff costs’. However, over the last few years there has been some dispute about whether expenses reimbursed to employees can be included within the heading of staff costs.

It has always been our view that the costs should in fact be included, however since 2013 HMRC has issued conflicting guidance as to what their view was. This has caused uncertainty as to whether costs can be included in claims or not.

Fast forward to October 2016 and HMRC released final guidance in relation to the issue in which they agreed with the profession that claims for reimbursed expenses, for example travel and subsistence payments, should have been allowed.

Why does the change in guidance create an issue? Well, following HMRC’s guidance over a number of years, businesses had been completing R&D claims on differing views and therefore some had excluded claims for reimbursed expenses.

HMRC are therefore allowing amendments to be made to R&D claims where the claim was originally made on or after 9 October 2014 in relation to periods ending between 9 October 2012 and 31 January 2016. The deadline for making a claim is 31st January 2018.

So, what’s next? If you believe that any claims covered in these periods may be affected by the changes HMRC have announced or you would like to discuss the potential for R&D claims generally, please get in touch.