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UK Taxman To Get Extra Training In R And D Tax Credits

by Robert Lee,, London

29 September 2006

UK tax officers are to undergo training in an attempt to improve their knowledge of the software development industry and boost the take-up of research and development tax credits by firms in the sector.

The move comes after a survey by the business advisory firm, Deloitte found a surprisingly low uptake of the research and development tax credit, particularly by small- and medium-sized companies. Of the 560 companies surveyed in March 2006, it was found that more than half (55%) of potentially eligible companies had not put in a claim for the credit.

The main reason given for not claiming the credit was that companies intended to claim, but had not yet done so. A lack of information about the the credit was a major factor, while potential claimants were also deterred by the complexity of the application process. However, there is additionally anecdotal evidence that tax officers have refused legitimate application requests because they misunderstood the nature of the claimant's business.

The Treasury's decision to boost the taxman's understanding of hi-tech industries has been welcomed by Intellect, the trade association for the UK IT, telecommunications and electronics industries.

“In the past, the industry’s view has been that tax inspectors have not always understood the software development process and how it is related to R&D Tax Credits. It is gratifying that after several years of lobbying by Intellect, we are now presenting this course to give tax inspectors a better understanding of software R&D procedures," commented Tom Wills-Sandford, deputy director general at Intellect.

The first training course is expected to run during the week commencing October 2, and Intellect, alongside HMRC, will be responsible for delivering the software aspect of the course.

Jeremy Sherwood, senior specialist on R&D, HMRC, stated: “We naturally want our inspectors to gain a fuller understanding of the R&D processes that take place within all types of industries, so they can help companies make better claims for R&D tax relief. Intellect has been telling us about particular issues with software claims and offered to help us train our inspectors. We are extremely grateful for their help.”

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