‘It’s essential that companies with genuine claims can have effective access to this vital support in building their businesses,’ says chief executive
Insurtech UK chief executive Mellisa Collett has called for more clarity over how the new expert advisory panel for research and development (R&D) tax credits will be used.
R&D tax credits support startups and insurtechs that work on projects in technology and science by allowing them to claim corporation tax relief for innovation.
The new R&D advisory panel, which was announced in the Spring Budget last week, is set to support the administration of such tax reliefs and provide insights into key sectors.
It will also review guidance to help HMRC and its directives remains up to date, as well as provide clarity to claimants.
This came after HMRC tightened its approach to R&D after its annual report, published on 17 July 2023, estimated that, across all sectors of the economy, error and fraud in R&D accounted for £1.13bn of losses between 2020 to 2021.
As a result, the government announced in November’s Autumn Budget that R&D expenditure and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024.
Collett told Insurance Times that the trade body will be “clarifying how the advisory panel can support HMRC around the new regime, which has caused significant challenges for both insurtechs and the broader startup community”.
“It’s essential that companies with genuine claims can have effective access to this vital support in building their businesses,” she added.
“We intend to engage further with HM Treasury and HMRC on this issue.”
However, there was no mention of a reversal for previous cuts to the R&D tax credits relief regime in the Spring Budget – when the relief is higher, firms can claim back more from the treasury.
In the Autumn Budget, the tax rate was reduced from 25% to 19%, while the threshold for R&D intensive loss-making SMEs was lowered from 40% to 30%.
Lewis Liu, chief executive of artificial intelligence (AI) software firm Eigen Technologies, was “disappointed” that no action had been taken to reverse this.
“These cuts act as a tax on founders and have already damaged the UK’s successful tech ecosystem that provides investment and high-paying jobs,” he said.
“It seriously undermines the government’s ambition of making the UK a technology and science superpower by 2030.”
He welcomed the expert advisory panel, but said that “the chancellor needs to stop dragging his heels and support investment in innovation”.
Justine Dignam, director of incentives and reliefs at Markel Tax, added: “For brokers looking to claim on R&D, this means nothing changes.”
“[We have] concerns that the level of relief available to SME companies is substantially lower than it has been – and whether it is fair that all companies, regardless of size, are now effectively entitled to the same level of relief for their investment in R&D.”