The government is treating claims for research and development (R&D) tax relief less generously, according to business adviser Grant Thornton.

The government is treating claims for research and development (R&D) tax relief less generously, according to business adviser Grant Thornton.

Samantha Vanags, technology and R&D partner at the firm, says, ‘In the course of making claims for our clients, we are experiencing a much higher volume of tougher challenges from HMRC.’

These challenges relate to claims for R&D costs where prototypes may be sold for use rather than scrapped, or, in the toughest interpretation of the rules, where there is the prospect of producing goods or services for supply to customers as a direct consequence of the research.

Adds Vanags, ‘These new interpretations will make life particularly difficult for the many leading-edge engineering and technology companies which are already adversely affected by current economic conditions.’

Another area where the taxman may be looking to clamp down on R&D tax reliefs is in claims for staff time. ‘The basis of HMRC’s dispute seems to be that it considers that no member of staff can spend all of their time on R&D activities,’ Vanags states.

It remains to be seen whether these tighter interpretations of the rules result in full-blown legislative changes, she concludes.