There are 3 changes coming to R&D relief following this year’s Budget announcements. On the face of it they all sound fairly innocuous but a lack of detail at present leaves me slightly concerned about the third change.

The changes are:

  • Vaccine Research Relief (VRR) is to be abolished for expenditure incurred on or after 1 April 2017.
  • The calculation of the notional large company aid – for the purposes of the SME Aid Cap rules – is to be amended to reflect the changes to large company relief (i.e. the introduction of the RDEC).
  • HMRC will be given powers to collect “additional data” to enable it to comply with new EU State Aid monitoring and reporting requirements*.

The first 2 changes are fairly straightforward and, frankly, of relatively limited application. According to HMRC statistics there are only around 10 companies claiming VRR each year and the amounts claimed are not significant. The Aid Cap rules are pretty generous and this change is making sure that they remain so.

The State Aid transparency/modernisation changes are slightly more interesting, however. Not least because HMRC has provided very little real information on the details of the change at this point. The Policy Paper announcing this proposed change contains the following statement.

Legislation will be introduced in Finance Bill 2016 to provide HMRC with additional powers to:

  • require information to be provided by the beneficiary as a condition of entitlement for tax relief
  • require information to be provided for the purpose of checking that state aid requirements have been fulfilled
  • disclose information through a legal gateway for the purpose of publication

We know, therefore, the sort of powers that HRMC are to be given in this respect – requiring the company to provide additional information – but we don’t yet know what that information will be. Reading through the EU papers that are behind this proposed change, however, leaves me a little worried that this may not be good news for innovative SMEs.

Unfortunately, we will have to wait for the publication of the Finance Bill to find out how the Government plans to implement these EU requirements.


* This proposal also affects other State Aid reliefs.