Latest House of Lords report makes recommendations on R&D tax relief

Back in November 2022, I gave evidence to the Finance Bill sub-Committee of the House of Lords’ Economic Affairs Committee as part of its inquiry into draft legislation on R&D tax relief reform.

Last year the Lords called for the government to reconnect R&D tax reliefs with their positive policy intent. They also questioned whether HMRC had the right resources to administer the scheme effectively.

Just over a year on, and the Lords have published a further report on R&D tax matters, in response to a second raft of changes in the most recent Finance Bill. It includes some clear and important recommendations, including delaying the commencement date for the planned merged scheme. The report echoes calls from many in the industry who have raised concerns that these major changes are being rushed.

The government’s response to this latest inquiry is due by 1 April, three weeks after the forthcoming Spring Budget on 6 March. This date represents the last practical chance for those hoping for a delay.

The committee also noted that despite reassurances from the government following last year’s inquiry, witnesses reported that HMRC service levels continued to be a worry. They noted: “it is counter-productive to keep introducing new legislation placing additional burdens on HMRC if the department is already unable to provide a satisfactory level of service to taxpayers.”

Strong words which will no doubt ring true for many companies caught in enquiries triggered by HMRC’s rapidly scaled up volume compliance team. For example, at ForrestBrown, our FB Consulting team is busy working with businesses who submitted claims themselves or with other advisers and who are now finding these claims under scrutiny. Find out more about the tailored support FB Consulting can offer your business.

Let’s hope the Lords’ constructive recommendations can help shape guidance for the merged scheme and the future direction of R&D tax policy.