HMRC sets up specialist units for R&D tax credit claims
HM Revenue & Customs is setting up seven specialist research and development (R&D) tax credit units around the country. The units will be up and running from 1 November 2006 and will deal with all R&D tax credit claims from companies apart from those dealt with by the Large Business Service. The units will deal with claims from small and medium enterprises under Schedule 20, Finance Act 2000 as well as claims by large companies under Schedule 12, Finance Act 2002 and claims to vaccine research relief under Schedule 13 Finance Act 2002.
The units will be located in:
- Cambridge
- Croydon
- Leicester
- Maidstone
- Manchester
- Solent (Portsmouth)
- Cardiff (covering Wales, Scotland and Northern Ireland)
The Cardiff unit will have a small satellite office in Scotland to carry
out customer service and enquiry work there.
The aim of these specialist units is to improve the handling of claims by
concentrating the work in a smaller number of locations staffed by specially
trained officers. This should lead to greater consistency from HMRC in dealing
with claims and more certainty for companies making claims.
Another important role for the new units will be to raise awareness of the scheme among eligible companies, their agents and organisations such as Chambers of Commerce, Regional Development Agencies and Business Link Offices. Although most companies carrying out qualifying R&D are aware of the availability of R&D tax reliefs, there are still some that are not. In 2005, HMRC commissioned a survey of nearly 1,000 companies carrying out R&D. The survey found that 82% of respondents were aware of the relief prior to the survey. And 71% of respondents who were aware of R&D tax credits and thought their company was eligible had already made a claim. Of those companies that had made a claim, around three-quarters found the claims process easy or fairly easy.
Although these figures are very encouraging, there is room for improvement, especially among smaller companies. The survey showed that companies with fewer than 10 employees were less likely to have a good understanding of the scheme or to have claimed.
In November 2006, the DTI is publishing a brochure of case studies setting out the experiences of 14 companies that have claimed the relief. The brochure covers a variety of company sizes, locations and industries and demonstrates the very wide diversity in nature and scale of R&D across the country. The brochure will be available from the DTI publications orderline via e-mail from publications@dti.gsi.gov.uk or by calling 0845 015 0010, and for downloading from the R&D pages of the DTI. In conjunction with the brochure the DTI is also publishing a pocket-sized leaflet selling R&D Tax Credits within the wider innovation message and sign-posting to the booklet for further information.
Background
Research and development tax credits are a company tax relief which can either reduce a company’s tax bill or, for some small or medium sized companies, provide a cash sum. The relief is not available to unincorporated businesses or partnerships.
The aim of the tax credits is to encourage greater R&D spending in order to promote investment in innovation. Between April 2000 and April 2006 around 22,000 claims for R&D tax credits were made with almost £1.8 billion of support claimed.
The R&D tax credit works by allowing companies to deduct up to 150% of qualifying expenditure on R&D activities when calculating their profit for tax purposes. Small or medium companies can, in certain circumstances, surrender this tax relief to claim payable tax credits in cash from the HM Revenue & Customs. Although the term “tax credit “ only strictly applies to the payable cash element available to small and medium enterprises, it is commonly used to refer to the enhanced deduction against profits as well. That practice has been adopted in this article. More detailed information is available at R&D, including advice on how to claim.
In December 2005 the Chancellor announced that the administration of R&D Tax Credits for companies would be improved by creating specialist R&D units to deal with all R&D tax credit claims outside the Large Business Service (which deals with the thousand or so very largest companies). Work has been ongoing since then to ensure that the units are operational and will deal with all new claims from 1 November 2006.
A three day training event for HMRC staff joining the new units was recently held in the HMRC training college in Lincoln. This included specialist training on software R&D claims, produced with the help of Intellect (the trade association for the IT, telecommunications and electronics industries) and R&D specialists from the big four accountancy firms.
Action required
From 1 November 2006, companies and agents should send corporation tax returns with R&D tax credit claims to the specialist unit dealing with the postcode for the location of the main R&D activity of the company. This is a departure from the traditional practice where HMRC has normally allocated companies to tax offices on the basis of the address of the company’s Registered Office. This new approach is designed to help achieve the customer service aims of the initiative. It will help the new units if companies and agents state the location of their main R&D activity in claims to relief after 1 November 2006.
A list of postcodes dealt with by each office is included at the end of this article, together with the contact address for each office.
There are four general exceptions to this:
- Companies dealt with by the Large Business Service.
- Companies dealt with by the specialist pharmaceutical units in Manchester, Cambridge and Croydon should continue to send their returns to their current tax office. It has recently been decided to move the work currently dealt with by the Reading pharmaceutical unit to Solent (Portsmouth), so pharmaceutical companies dealt with by the Reading office should now send their R&D claims to the Solent Unit.
- Companies dealt with by the SCECs (Small Company Enterprise Centres) in Maidstone and Cardiff should continue to send their returns to these offices.
- Companies dealt with by HMRC Charities in Bootle should continue to send their returns there.
Companies in Wales, Scotland or Northern Ireland that are not in the four categories above should send their claims to the Cardiff unit.
There will be a transitional period running from 1 November 2006 to April 2007 in which the corporation tax responsibilities for most companies with existing claims will be transferred to the appropriate specialist unit. Companies and their agents affected by this will be kept informed during the process.
The intention is that in most cases the R&D specialist unit will deal with all aspects of a company's corporation tax return if it includes an R&D claim. This is similar to the approach HMRC has already got in place for companies dealt with by the Small Company Enterprise Centres. But for a small number of very large companies or groups the R&D claim is only one relatively minor element of their tax affairs. In these cases, the main tax office will stay the same, but the R&D claim will be handled with input from the appropriate specialist unit. These cases will be identified by the specialist units on a consistent basis, so companies who think they may be covered by this situation should follow the general advice to send their R&D claims to the appropriate specialist unit.
From 1 November 2006, agents or companies with specific questions about making R&D claims under the new set-up are encouraged to contact the appropriate specialist unit for advice. Contact details for the new units are as below:
Cambridge R&D Unit
Eastbrook
Shaftsbury Road
Cambridge
CB2 2DJ
Tel 01223 442534 (This number is for company R&D/Pharma enquiries ONLY)
*
*Callers for non-R&D enquiries should call 0845 302 1453
Croydon R&D Unit
Southern House
Wellesley Grove
Croydon
Surrey
CR9 1WW
Tel 0208 633 4307
Leicester R&D Unit
Saxon House
1 Causeway Lane
Leicester
LE1 4AA
Tel 0116 2535400
Maidstone R&D Unit
Medvale House
Mote Road
Maidstone
Kent
M15 6AE
Tel 01622 760403
Manchester R&D Unit
6th floor
Albert Bridge House
1 Bridge Street
Manchester
M60 9AF
Tel 0161 288 6308 (This number is for company R&D/Pharma enquiries ONLY)
*
*Callers for non-R&D enquiries should call 0845 302 1477
Solent R&D and Pharma Unit
Lynx House
1 Northern Road
Cosham
Portsmouth
PO6 3XB
Tel 02392 223881 (This number is for company R&D/Pharma enquiries ONLY)
*
*Callers for non-R&D enquiries should call 0845 302 1400
Cardiff R&D Unit (Wales, Scotland and Northern Ireland)
14 East, Phase 2
Ty Glas
Llanishen
Cardiff
CF14 5FP
Tel 02920 327003 (This telephone number is for company R&D enquiries ONLY.)*
*Callers for non-R&D enquiries should call 0845 300 3949
From 1 November 2006, companies whose main R&D activities are located in one of the following postcodes should send their corporation tax returns containing R&D tax credit or relief claims to the appropriate office listed below.
| List of postcodes covered by each office | |
|---|---|
| AB | Cardiff |
| AL | Cambridge |
| B | Leicester |
| BA | Cardiff |
| BB | Manchester |
| BD | Manchester |
| BH | Solent |
| BL | Manchester |
| BN | Maidstone |
| BR | Croydon |
| BS | Cardiff |
| BT | Cardiff |
| CA | Manchester |
| CB | Cambridge |
| CF | Cardiff |
| CH | Manchester |
| CM | Maidstone |
| CO | Maidstone |
| CR | Croydon |
| CT | Maidstone |
| CV | Leicester |
| CW | Manchester |
| DA | Maidstone |
| DD | Cardiff |
| DE | Leicester |
| DG | Cardiff |
| DH | Manchester |
| DL | Manchester |
| DN | Leicester |
| DT | Solent |
| DY | Leicester |
| E | Maidstone |
| EC | Maidstone |
| EH | Cardiff |
| EN | Cambridge |
| EX | Cardiff |
| FK | Cardiff |
| FY | Manchester |
| G | Cardiff |
| GL | Cardiff |
| GU | Solent |
| HA | Cambridge |
| HD | Manchester |
| HG | Manchester |
| HP | Croydon |
| HR | Cardiff |
| HS | Cardiff |
| HU | Leicester |
| HX | Manchester |
| IG | Cambridge |
| IP | Cambridge |
| IV | Cardiff |
| KA | Cardiff |
| KT | Croydon |
| KW | Cardiff |
| KY | Cardiff |
| L | Manchester |
| LA | Manchester |
| LD | Cardiff |
| LE | Leicester |
| LL | Cardiff |
| LN | Cambridge |
| LS | Manchester |
| LU | Cambridge |
| M | Manchester |
| ME | Maidstone |
| MK | Cambridge |
| ML | Cardiff |
| N | Cambridge |
| NE | Manchester |
| NG | Leicester |
| NN | Cambridge |
| NP | Cardiff |
| NR | Cambridge |
| NW | Croydon |
| OL | Manchester |
| OX | Solent |
| PA | Cardiff |
| PE | Cambridge |
| PH | Cardiff |
| PL | Cardiff |
| PO | Solent |
| PR | Manchester |
| RG | Solent |
| RH | Maidstone |
| RM | Maidstone |
| S | Leicester |
| SA | Cardiff |
| SE | Maidstone |
| SG | Cambridge |
| SK | Manchester |
| SL | Croydon |
| SM | Croydon |
| SN | Solent |
| SO | Solent |
| SP | Solent |
| SR | Manchester |
| SS | Maidstone |
| ST | Leicester |
| SW | Croydon |
| SY | Cardiff |
| TA | Cardiff |
| TD | Cardiff |
| TF | Leicester |
| TN | Maidstone |
| TQ | Cardiff |
| TR | Cardiff |
| TS | Manchester |
| TW | Croydon |
| UB | Croydon |
| W | Croydon |
| WA | Manchester |
| WC | Cardiff |
| WD | Cambridge |
| WF | Manchester |
| WN | Manchester |
| WR | Cardiff |
| WS | Leicester |
| WV | Leicester |
| YO | Leicester |
| ZE | Cardiff |
