In this week’s miscellaneous updates, HMRC has published updated guidance on research and development (“R&D”) tax relief and the latest guidelines for compliance published by HMRC examine common errors in capital allowances claims for plant and machinery. The form for reporting CGT on residential property gains has recently been reformatted and HMRC has published updated guidance for employer’s on giving foreign tax credit relief. Foreign businesses can now apply for gross payment status under the construction industry scheme and, finally, HMRC’s latest schedule of live and recorded webinars for tax agents is available for booking. Spaces are limited, so take a look now and save your place.
Updated guidance on R&D tax relief
HMRC has published updated guidance on R&D tax relief as follows:-
SMEs registered in Northern Ireland whose business activities involve no element of trade in goods, and no relevant activities in relation to electricity, can choose to opt out of these provisions by notifying HMRC.
Affected companies are not subject to the restrictions for relief on payments to overseas contractors or providers of externally provided workers and will be able to claim enhanced R&D intensive support, subject to a rolling 3-year limit. Above this limit, relief is available under the new merged scheme.
Enhanced R&D intensive support allows loss-making R&D intensive SMEs to:-
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deduct an extra 86 percent of their qualifying R&D revenue costs as an additional deduction in calculating their adjusted trading loss, in addition to the 100 percent deduction which is already available to make a total of 186 percent deduction; and
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claim a payable tax credit, which is not liable to tax, and which is worth up to 14.5 percent of the surrenderable loss.
The guidance on what detailed information is needed to send to HMRC to support R&D tax relief claims, and when and how to submit it has also been updated.
Guidelines for compliance (“GFC”) 5 - common errors in capital allowances claims for plant and machinery
HMRC recently published GFC 5 which aims to assist taxpayers and agents in managing risks in making a claim for capital allowances on plant and machinery. The guidelines set out areas where errors are commonly made and includes a recommended approach for making a claim and keeping records. According to HMRC, the guidelines do not represent a change in the law or HMRC policy.
In November 2021 HMRC announced that it would be publishing GFC as part of its action being taken in response to its review of tax administration for large businesses. GFCs aim to provide practical guidance and greater transparency on the approaches HMRC regards as higher or lower risk and the associated response.
CGT on UK residential property gains
Disposals of UK residential property must generally be reported to HMRC within 60 days of completion. This deadline applies to anyone UK or non-UK tax resident with transactions able to be reported to HMRC on paper in some cases. Recently, the format of the paper form changed from a PDF to an online form. Once completed, the form should be printed and posted to HMRC, as before.
HMRC has been contacting some taxpayers by email in relation to reporting these transactions. HMRC is following up on these emails by contacting taxpayers by phone in order to gather feedback on the email.
New guidance for employers giving foreign tax credit relief
HMRC has published updated guidance for UK employers on providing foreign tax credit relief (“FTCR”) to employees. If an Appendix 5 arrangement is in place, the employer is able to offset foreign tax deducted from the employee’s pay against tax due under PAYE via FTCR. This offset is limited to the employee’s UK income tax liability.
Foreign businesses and the Construction Industry Scheme (“CIS”)
Businesses based outside the UK can now use form CIS305 to register as a subcontractor and apply for gross payment status under the CIS.
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