Government rejects scientific help on R&D relief

The government has resisted calls for a scientific panel of advisers to help
with R&D tax credit claims, in a review of the troubled relief.

Announcing a review today, the Treasury said that it would instead press
ahead with building specialist R&D units within HMRC to resolve problems
with the credits.

The credits have faced criticisms from many that tax inspectors are
ill-qualified to rule on the claims, and that scientifically trained officers
should help out.

The paper on the credits notes the criticism, adding: ‘The criticism has
stemmed from a small number of difficult cases, but these cases have highlighted
the need to consider measures to improve consistency across the handling of all
claims.’

But a panel of scientifically trained outsiders ruling on claims would risk
breaches of confidentiality, the government has concluded, adding that some
claimants would not have bothered claiming if there was a risk of technological
innovations leaking out to competitors.

The Treasury has decided to go with R&D units within HMRC, a view that
was immediately welcomed by the Federation of Small Businesses.

Simon Sweetman, the FSB’s tax spokesman, told Accountancy Age that
the move ‘makes perfect sense,’ but questioned the government’s view on the
scale of problems facing it: ‘It would surprise me if there were only a few
cases. I have handled three myself in a relatively small practice.’

Problems have been particularly acute on software claims, he said, with some
businesses complaining they spend more on advice than they receive in the
credits.

Just as the review emerged, BE Studios and Smith & Williamson were in
court again to hear judgment on the issue of costs in their negligence claim,
which raised significant issues about the R&D tax credit.

Christopher Dickens, a director of BE, has been made a party to the action,
leaving him liable to Smith & Williamson’s costs, awarded in the firm’s
favour earlier this year.

Meanwhile, BE confirmed that it plans to continue its appeal against the
original verdict handed down in July.

Its appeal rests in part on the idea that the judge had not interpreted DTI
guidelines on the credits correctly, an argument that, if upheld, would raise
further questions about the difficulty of understanding the R&D tax credit
system.