My reaction when company due diligence of a takeover target uncovers the application of R&D tax credits by the target, is typically one of wondering what is going to happen next and how big an issue it is going to be. All too often I see the news met by the knowing and weary shaking of accountancy and tax heads, that HMRC could just come along and challenge the application of these credits at some point in the future, and the buyer could watch the apparent benefit of them disappear in a proverbial puff of smoke.
It is good news in this context therefore, that from this month onwards HMRC is launching a new advanced assurance service, focusing on improving access to R&D tax credits for small and medium-sized enterprises with a turnover of less than £2M and fewer than fifty employees. Successful applicants will receive formal assurance that HMRC will not query their first three years of R&D tax credits based on the principles agreed with the Revenue. If the scheme is successful, the plan is to roll it out to companies with larger turnover.
Investing in research and development is so important to enabling a business to grow in the right way, and it should not just be the preserve of bigger companies with resources to spend on the right tax advice. So let’s hear it for tax incentives for helping small businesses to grow through excellence in innovation.