UK: R&D consultation, next round

In addition to the patent box paper, the Treasury also published the next round of R&D consultation – this is rather more a summary of responses to the last consultation than new information.

In summary:

  • not ruling out ‘above the line’ R&D relief/credit but the Government still needs to be convinced
  • large company subcontractor costs to qualify for the subcontractor only where the subcontractor is aware that it is qualifying R&D and has evidence to this effect
  • no plans to extend qualifying expenditure to cover (eg) rent of premises used for R&D
  • draft legislation in the Autumn to allow a wider range of externally provided workers to qualify
  • no plans to restrict internally created software from being qualifying costs
  • improved guidance on whether prototypes will be qualifying R&D – whether the ‘uncertainty’ principle applies
  • plans for a pilot scheme will be brought in during the Autumn so that small companies and start-ups can get advance assurances that can be relied on in making R&D claims for several years

The Government is looking for specific responses (by 2 September 2011) on:

  • qualifying indirect activities: should the relief be retained?  (QIA are hard to define and harder to get relief for)
  • should there be some form of certification or election process to provide certainty for subcontractors as to whether the work they are doing is R&D?
  • does the removal of the PAYE/NICs limit on the repayable credit require any safeguards?
  • does the ‘going concern’ definition need to be reformed, to make it closer to that for EIS/VCT?

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