The CIOT has highlighted potential uncertainty around evidence to substantiate a claim for overseas expenditure on contracted-out R&D and has urged HMRC to consider clarification. The CIOT was responding to HMRC’s consultation on draft guidance for two aspects of the new R&D tax relief regime: the extent to which contractor payments for R&D and payments for externally provided workers would qualify for relief where the R&D activity takes place overseas, and the new rules for contracted-out R&D.
Further guidance on the evidence to support a claim for overseas expenditure on contractor payments would be helpful for taxpayers, says the Institute. Although a flexible rather than an overly prescriptive approach, reflecting the particular industry and circumstances, could be advantageous for business, HMRC caseworkers will need a detailed understanding of the sectors and businesses involved when deciding what documentation is required, suggests the CIOT (reflecting, perhaps, concerns with the way decisions on some R&D claims have previously been taken).
CTA 2009 s 1133 (contracted out R&D) has been drafted very broadly and appears to rely on the guidance to reduce its scope. In particular, the emphasis the guidance places on allowing the decision-maker to claim contrasts sharply with the legislation which does not introduce this concept. The CIOT suggests that the legislation should be amended in a future Finance Bill to provide clarity.
The CIOT also urges HMRC to publish guidance as soon as possible on the rest of the new R&D regime, given that the new regime will come into effect on 1 April 2024.
The CIOT has highlighted potential uncertainty around evidence to substantiate a claim for overseas expenditure on contracted-out R&D and has urged HMRC to consider clarification. The CIOT was responding to HMRC’s consultation on draft guidance for two aspects of the new R&D tax relief regime: the extent to which contractor payments for R&D and payments for externally provided workers would qualify for relief where the R&D activity takes place overseas, and the new rules for contracted-out R&D.
Further guidance on the evidence to support a claim for overseas expenditure on contractor payments would be helpful for taxpayers, says the Institute. Although a flexible rather than an overly prescriptive approach, reflecting the particular industry and circumstances, could be advantageous for business, HMRC caseworkers will need a detailed understanding of the sectors and businesses involved when deciding what documentation is required, suggests the CIOT (reflecting, perhaps, concerns with the way decisions on some R&D claims have previously been taken).
CTA 2009 s 1133 (contracted out R&D) has been drafted very broadly and appears to rely on the guidance to reduce its scope. In particular, the emphasis the guidance places on allowing the decision-maker to claim contrasts sharply with the legislation which does not introduce this concept. The CIOT suggests that the legislation should be amended in a future Finance Bill to provide clarity.
The CIOT also urges HMRC to publish guidance as soon as possible on the rest of the new R&D regime, given that the new regime will come into effect on 1 April 2024.
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