Changes to the R&D regimes announced in the Budget

John Moore, March 18th, 2015

In the Budget on 18 March 2015 the Government has made two announcements relating to the operation of the R&D tax relief schemes.

Improving access to R&D tax credits for small businesses – Voluntary Advance Assurances

In our previous article announcing the consultation on this subject on 28 January 2015 we noted the Government’s intention to consult widely on ways in which the scheme rules could be changed to improve access for SMEs. HMRC have reviewed the consultation responses received and have announced that it will introduce voluntary advance assurances lasting 3 years for smaller businesses making a first claim from autumn 2015 and reduce the time taken to process a claim from 2016. There will be new standalone guidance aimed specifically at smaller companies, backed by a 2 year publicity strategy to raise awareness of R&D tax credits. HMRC will publish a document in the summer setting out a roadmap for further improvements to the scheme over the next 2 years.

Our view

We will need to wait until the autumn for the guidance to be published but it appears to be a good first step in responding to the concerns of businesses in this area. It would appear that this process, which will require interaction with HMRC, will afford first time claimants some certainty over the qualification of their R&D projects and the methodology used to calculate the qualifying costs. We understand that HMRC will want to avoid a lengthy process with each company and so it is likely that companies will need to make the process as efficient as possible by providing quality information to HMRC. We understand that this will not be restricted to companies claiming the SME relief but will also apply to those smaller businesses claiming under the large company scheme and the R&D Expenditure Credit (RDEC) scheme where applicable.

Changes to the treatment of consumable items

Following the publication of the draft legislation at the time of the autumn statement, which we covered on our article of 4 December, HMRC have made a further change to the legislation that will be effective from 1 April 2015. The legislation implementing the changes to the treatment of expenditure on consumable items has been revised to address concerns expressed in consultation. The changes will be clarifying that the new restriction will not apply where the product of the R&D is transferred as waste, or where it is transferred but no consideration is received. HMRC have also said that it will continue to monitor how the legislation operates and will propose further changes if necessary.

Our view

This is a useful clarification covering some particular situations that can be found in practice. However we remain concerned about the adverse impact that this overall change will have on the qualifying expenditure of certain manufacturing businesses.


Please do not hesitate to contact John Moore on 0207 292 8850 or at if you would like to discuss the implications of this for your company.

This briefing is prepared by Kingly Brookes LLP, a limited liability partnership. For further information on any of the material contained in or referred to in the briefing, please contact us. This briefing note is intended to keep our readers up to date with the developments in this area, but it is a general guide only and is not intended to be a comprehensive statement of the law and practice in this area. No liability is accepted for the opinions it contains or for any errors or omissions.