ICAS responses to consultations on advance tax certainty for major projects and R&D clearances

Susan Cattell highlights ICAS responses to consultations on advance tax certainty for major projects and R&D clearances.

We have responded to recent HM Treasury and HMRC consultations which proposed new mechanisms for giving certainty to businesses on tax issues: Advance tax certainty for major projects and R&D tax relief advance clearances. Both sets of proposals are intended to encourage business investment – and in the case of research and development (R&D), also to tackle error and fraud. 

Major Projects

The consultation proposes a dedicated service, tailored to the largest and most innovative investment projects, given their scale, complexity and range of tax implications. The intention is to provide certainty over how the tax rules will be applied to a project, if it proceeds as planned.

Our response noted that we believed that the proposals do have the potential to produce some positive impact on business investment. We understand there is interest in using the process in the energy and infrastructure sectors (which seem to be the main targets) but also in telecoms and technology sectors.

We supported the principle behind the proposals but noted that the threshold for accessing the clearances is set at a very high level so most businesses will be excluded. Major projects are obviously important, but the proposals don’t recognise the scope for significant growth to come from the expansion of mid-sized companies – which also need certainty when considering future investment. 

We commented that we would like to see investment by HMRC in improving some existing routes to certainty, which would help a much wider range of businesses. Specifically, we would like improvements to the current non-statutory clearance (NSC) process to make it more useful. We receive feedback that a major barrier to using NSCs is the requirement for there to be ‘genuine uncertainty’. Frequently businesses believe there is uncertainty and devote time and effort to applying for a clearance, but HMRC rejects the request on the basis that the position is clear – leaving businesses with no route for obtaining certainty.

We also pointed out that introducing this new regime, or improving the existing NSC process, won’t address the need for greater legislative clarity and stability. For example, there have been numerous changes in the energy sector in the last few years. Constant tax changes affect investment decisions. 

Our response also gave input on the specific questions about the design of the proposed regime. 

R&D clearances

This consultation wanted views on clearances for R&D tax reliefs, with the aims of reducing error and fraud, increasing certainty for companies, and improving customer experience. One option would be voluntary clearances, for companies looking for an assurance that their claim is valid; these could not be made available to all companies, so access would be restricted to growing and high potential companies (and sectors set out in the government’s Industrial Strategy). However, another option would be a requirement to obtain mandatory ‘assurance’ in areas where there is a very high degree of non-compliance.

Our response didn’t address all the detailed questions in the consultation. We expressed concern that there is a risk of adding further complexity and potentially duplicating existing processes (like Claim Notification and the Additional Information Form), without significantly improving HMRC’s ability to achieve the stated aims. 

We proposed adapting the Claim Notification Form (“CNF”) as part of a two-step process. In summary, the first step would be the adapted CNF which would be used to stream claims into higher and lower risk categories. The second step would be an enhanced compliance process to be applied to the higher risk claims. Our response went on to set out further details on the proposed two steps. 

We believe that this approach would allow HMRC to continue to improve its claim risk analysis and deploy its resources effectively in tackling error and fraud, whilst ensuring that the process for claiming relief aligns with the policy intention of providing increased confidence to businesses making genuine claims

Let us know what you think

We respond to tax consultations and calls for evidence and attend meetings with HMRC at which service levels, delays and other issues you raise with us are discussed. We welcome input from members to inform our work; email our tax team to share your insights and feedback.

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