The Autumn Budget 2024 brought reassuring news for businesses involved in research and development (R&D) tax credits. After a period of frequent changes and uncertainty, the budget has maintained the current rates and structures for R&D tax relief, offering companies some much-needed stability. This pause allows businesses to focus on adapting to the existing schemes, without the pressure of new policy changes looming.

A Period of Stability After Constant Changes

Recent years have been marked by continuous adjustments to the R&D tax credit system, leaving businesses to constantly adjust their approach to claims. The decision to keep the current R&D tax relief rates steady in the Autumn Budget 2024 provides businesses and advisors with a chance to catch up and streamline their claim processes.

However, despite the continuity in relief rates, there are a few updates in the budget that warrant attention.

Planned Consultation for Spring 2025

One significant update is the government’s plan to hold a consultation in Spring 2025 to discuss the potential expansion of Advanced Assurance for R&D claims. While further details are awaited, this consultation could indicate greater support for businesses seeking more clarity and confidence when making claims. We’ll keep you updated as more information becomes available.

HMRC’s Approach to Compliance

HMRC has also shared additional insights into its compliance strategy, building on the previous updates issued in July. While many of the points were expected, the numbers revealed some important trends in the compliance process:

• Mandatory Random Enquiry Programme (MREP): This ongoing programme will continue in the foreseeable future.
• Compliance Check Rate: In 2023-24, 17% of claims underwent compliance checks, with an average processing time of 246 days. This marks an increase from the previous year’s 10% and 269 days.
• Tax Recovery: The total tax recovered has risen significantly, with a 53% increase, reaching £441 million.

These figures underscore HMRC’s increased focus on ensuring the legitimacy of R&D claims and improving the accuracy of submissions.

Complaints and HMRC’s Response

There has been a noticeable rise in complaints about HMRC’s compliance process. The complaint rate jumped from 2.5% in 2022-23 to 4.3% in 2023-24, with nearly half of these complaints being upheld. This suggests that businesses are finding the compliance process more difficult, prompting HMRC to take action.

In response, HMRC is working to improve its R&D compliance efforts by focusing on:

• Better Guidance and Communication: Ensuring information is clear and accessible.
• Enhanced Communication: Improving the quality and transparency of written correspondence.
• Consistency in Rules and Penalties: Standardizing the enforcement of rules and penalties.
• Clear Escalation Routes: Providing more transparent pathways for addressing complex cases.
• Additional Assurance for Complex Claims: Offering further verification for claims with more intricate technical details.

These efforts indicate that HMRC is committed to improving the claims process and making it easier for businesses to navigate.

Preparing for the Future

To avoid complications with HMRC, businesses should continue submitting well-prepared, comprehensive claims. The stability provided by this budget allows advisors to focus on mastering existing schemes like the Research and Development Expenditure Credit (RDEC) and the Enhanced R&D Incentive Scheme (ERIS), without worrying about imminent changes.

Updates to the Additional Information Form

It’s also worth noting that HMRC has recently updated the Additional Information Form for R&D claims. While some changes are administrative, such as requiring more detailed business information, others demand more specific cost breakdowns for claims under the Merged or ERIS schemes. Businesses need to stay informed about these changes, as they may affect how claims are submitted.

Final Thoughts

The Autumn Budget 2024 didn’t introduce major changes to R&D tax credits, but it has provided much-needed stability for businesses. As we move forward, staying informed and thorough in submitting claims will remain essential. With HMRC refining its compliance processes and a consultation on the horizon, businesses can look forward to a more transparent and efficient claims experience.