Research and development (R&D) tax reliefs: consultation on a single scheme
Executive summary
AAT agrees that a single scheme for research and development (R&D) tax relief would be beneficial. AAT advocates for a fairer, more transparent and simpler tax system. Consolidating R&D relief into a single scheme under the Research and Development Expenditure Credit (RDEC) structure would reduce complexity, as would improved and clearer guidance.
The RDEC cap should also be the one used in a new single scheme.However, a new scheme should not neglect the need to provide a targeted higher rate relief to SMEs. A simplified single scheme should still have measures which offer SMEs higher rate relief to incentivise investment in R&D. If the government wants to grow the economy and boost productivity, it must still offer relief that incentivises small businesses to invest in R&D.
AAT would recommend the government conduct research to evaluate how to treat subcontractors. The determining factor should be which way best incentivises R&D investment and supports small businesses.
AAT would be wary of giving more generous support to specific sectors or types of R&D. This would go against the government’s policy principle of simplification. Instead, we would argue for a higher rate relief for SMEs but under the structure of a single RDEC-like scheme.
Whatever scheme is chosen, any implementation date must be given well in advance, accompanied with clear guidance for businesses. We would have no objection to the April 2024 start date so long as businesses were consulted on it well ahead of time and provided with clear unambiguous guidance on how to comply.
AAT does not support a reintroduction of a threshold and instead calls for compulsory professional body membership for the entire paid-for tax advisory market. If the rationale behind introducing a threshold is to reduce error and fraud, there is a much more effective way to tackle this while not disadvantaging SMEs (as a threshold would). The government could instead require compulsory membership of a recognised professional body which has robust disciplinary measures.
Related consultation responses
Tax reliefs inquiry
We believe there's room to reform major relief expenditures. We also recommend halving the headline rate of Inheritance Tax and reforming pension tax relief.
Property income review: call for evidence
While we appreciate that a single tax regime for all types of lettings would be simpler, it seems reasonable that different tax regimes should apply to each.
