Last week, the Chancellor Rachel Reeves delivered her Spring Statement. As a reminder, this Government’s fiscal framework aims for one Budget per year (usually in the Autumn) and a fiscal forecast (usually in the Spring).
Major announcements regarding changes in taxation were not anticipated in the Spring Statement, and that is what we saw. However, it is worth recapping the impact of Finance Act 2025 on the R&D tax regime.
Companies with a registered office in Northern Ireland
Finance Act 2025 enacted new legislation that will impact loss-making R&D intensive SMEs with a registered office in Northern Ireland. Loss-making R&D intensive SMEs are eligible for an enhanced rate of tax relief compared to other claimants. Companies with a registered office in Northern Ireland are subject to different rules with regards to the Enhanced Research and Development Intensive Support Scheme (ERIS).
The rules that apply specifically to companies registered in Northern Ireland are summarised below:
- Overseas restrictions on expenditure related to contracted out R&D and Externally Provided Workers (EPWs) do not apply.
- 3-year limit on the total additional relief, over and above what the company is entitled to through the new RDEC, plus any other de minimis aid received in the group. The amount must not exceed €300k.
These provisions take effect for claims made on or after 30 October 2024. HMRC will adapt the current Additional Information Form (AIF) to incorporate the necessary declarations in the coming months. For now, companies can use the existing AIF to make a claim.
Consultation on Advance Clearances
HMRC published a consultation on widening the use of advance clearances in R&D tax credits. Currently, the R&D tax system is a self-assessment regime where HMRC enquire into approximately 20% of claims to assess eligibility. First-time claimants with a turnover of less than €2m and less than 50 employees can currently apply for advance clearances through the ‘advance assurance’ mechanism ahead of making an R&D tax credit claim. A successful application guarantees that the claim will be accepted and not enquired upon for a 3-year period, providing greater certainty to eligible companies.
As you can see, the scope for entry is quite narrow with only 80 applications received by HMRC for advance assurance in 2023 to 2024. HMRC are therefore consulting industry on several points:
- Should this be open to a greater demographic of companies?
- How should the advance clearance be assessed and at what stage in the claims process?
- Should this be optional or mandatory?
- Should this be piloted to specific sectors?
- Should a minimum expenditure threshold be set?
We will be responding to this consultation and would like to hear views from businesses and accounting partners. The consultation is open until 26 May 2025, we will be reaching out to our clients and accounting partners to seek views shortly.
