Clear and efficient R&D tax claim system is vital
UNBELIEVABLY it has been a year since I became President of Greater Birmingham Chambers of Commerce (GBCC).
What a year it has been - a war in the Ukraine, rising energy costs, strikes, the death of the Queen, cost-of-living crisis and ongoing upheavals with government and the markets.
However, where there is darkness there is always light. That comes from the resilience, passion of our businesses.
This was highlighted through the joy and vibrancy of the Commonwealth Games, and the incredible awards events that have taken place throughout the region.
It also shone bright at the GBCC annual meeting, which brought together members to reflect on the past year achievements of the Chamber and its members and discuss what lies in store for 2023.
In addition, the tenacity of our businesses was shown at a recent roundtable I chaired as part of a visit to Birmingham of Sir Keir Starmer and Sheema Malhotra, MP.
While it is always a pleasure to highlight the successes of businesses it is also imperative that the challenges faced are also front and centre.
A current challenge which has been ongoing for months is with regards to the delay in payments from HMRC re R&D tax claims. Historically, business usually receives payment within 28 days.
Earlier this year HMRC updated their systems, in particular additional boxes to the CT600 form, which led to delays due to accountancy firms having to upgrade systems. Such was the delay that my company was instructed to send our claim by post firstly in June then again in August (documentation was mislaid!).
A fundamental issue is that there is no contact telephone to call to speak to the team responsible for processing the claim, and even if your accountant can get through on their
direct number, it appears that the people at HMRC do not have a direct line to those in the department responsible for processing the claims.
In my instance, HMRC confirmed with our accountants that they received our claim on August 28, 2022. Upon being asked what month they were currently processing our accountant was informed that they were processing week of September 26.
Upon being asked why our claim had yet to be processed we were informed that they didn’t know and they couldn’t ask because they had no number to call. We have now had to resubmit the claim again online and we are unsure whether we will end up with two payments, or our resubmission will result in pushing back our claim by a further 12 weeks.
Why is this important? It is not only important it is critical to the survival of businesses who have innovation as part of their DNA. The government actively encourages business to invest in innovation; for business to work collaboratively with universities/businesses.
This is what innovative businesses do, but that innovation comes at a risk and at a cost.
Through the provision of the R&D tax credit scheme, business is able to push forward innovations that would take much longer without that support or may not even evolve. This is ultimately about ensuring the competitiveness of UK business within the global market.
When a business is expecting a claim within 28 days, not receiving payment for four-to-nine months could actually be fatal and with the lack of effective lines of communication, the ability to emergency plan is impossible.
HMRC’s response is that they received an unexpected number of claims in April, some of which were fraudulent and therefore have had to draft in significant numbers of new staff to cope with the level of claims (all requiring training), as well as conduct an investigation into the fraudulent claims themselves.
HMRC’s investigations have been focused on the smaller level claims ie those below £50k, as HMRC believe that the problem lies within SME claims rather than the larger RDEC (research and development expenditure credit) claims.
Whilst this may be one of the reasons for the delays in payment, I don’t believe this is the whole story.
Having been involved in submitting R&D claims for a number of years it has been noticeable that the time it takes HMRC to process the claim has taken longer previously and I believe that this is largely due to lack of investment in staffing to
take into account the general legitimate increase in claims, and a lack of investment across HMRC in general with regards to their online systems.
This has naturally been made worse through the challenges faced as a result of Covid.
This has only made the impact of a distinct lack of joined up thinking and lack of integrated systems across HMRC, significantly worse.
In the Chancellor’s recent budget changes to the R&D tax claim system was mentioned, but lacked definitive detail.
At a time of increased pressure on business the R&D tax claim system needs to be a staple for innovative business. It needs to be clear and efficient and businesses, especially SMEs, need to be able to communicate with HMRC and get answers. Figures released by the Office for National Statistics state that: “Companies with fewer than 250 employees accounted for £24.3bn in R&D investment in 2021, a £4.3bn increase from 2018. Companies with more than 250 employees contributed £22.6bn in R&D investment in 2021”
‘nough said!
Anyone wishing to contact me re their own R&D tax claim position, please email president@birmingham-chamber.com
Businesses, especially SMEs, need to be able to communicate with HMRC and get answers.