Research & Development Tax Relief, and reimbursed expenses – HMRC has changed its tune…again!

Reimbursed expenses forming part of a Research & Development (R&D) tax claim have always been a tricky subject. Initially, reimbursed expenses were allowed and explicitly included in R&D tax legislation. HMRC then issued guidance in 2014 contradicting this, stating that staffing costs were intended to cover contractual costs only. There has been much to-ing and fro-ing on this point, however, HMRC have finally updated their guidance, clarifying the treatment of reimbursed expenses.

In the updated guidance published in July 2017, HMRC clarified that expenses, which are initially borne by the employee and incurred in order to fulfil R&D duties, fall within the definition of qualifying staff costs.

In layman’s terms, this means that if an employee has incurred travel costs attributable to a R&D project and are subsequently reimbursed, the company can claim these costs as qualifying R&D expenditure. This is only true for reimbursed costs so, for example, if the employer has already arranged and paid for the travel costs to and from the R&D project site, these costs would still be ineligible.

This results in the potential underclaim of previously submitted R&D claims. Luckily, HMRC have acknowledged this and extended the usual timelimits to amend a previously submitted R&D tax claim. If the claim:

  • Was submitted on, or after 9 October 2014; and
  • Is in respect of accounting periods ending between 9 October 2014 and 31 January 2016

The company is eligible to amend the R&D tax claim past the standard 2-year period and has until 31 January 2018 to do so.

Chiene + Tait’s R&D tax team specialises in enhancing the value of previously submitted R&D tax claims and, in the past year, have help clients claim over £1m in tax credits from HMRC. If you think your company would benefit from our expertise please contact Dave Philp on 0131 558 5800 or email mail@chiene.co.uk.