HMRC has updated its Corporate Intangibles Research and Development (CIRD) manual to clarify its position on subsidised and subcontracted R&D expenditure in response to recent tribunal decisions involving Collins Construction Ltd (CCL) and Stage One Creative Services (SOCS).
This follows HMRC’s announcement on 31 January 2024, where it confirmed that businesses with open R&D tax relief enquiries or ongoing appeals potentially impacted by these rulings would receive letters outlining the next steps.
What Has Changed?
The updated guidance is now available in the following sections:
- CIRD81650 – Subsidised Expenditure This section explains when R&D expenditure is considered subsidised, which affects a company’s ability to claim R&D tax relief. Under the revised guidance, HMRC acknowledges the tribunal’s decision that not all funding received by a business automatically makes the R&D expenditure ineligible. The nature of the funding and its connection to specific R&D activities must be carefully assessed.
- CIRD84250 – Subcontracted R&D This section clarifies how subcontracted R&D costs should be treated. The updated guidance reflects the tribunal’s ruling that companies subcontracting R&D work to third parties may still be eligible for relief under certain conditions. It provides more detailed interpretation on who holds the R&D risk, who makes key decisions, and how contracts are structured, which are all key factors in determining eligibility.
What Happens Next?
With these updates, HMRC has now accepted the tribunal’s decisions on these key issues. Caseworkers will begin applying this updated guidance when reviewing affected R&D tax relief claims, including open enquiries and appeals. Businesses identified as potentially impacted will be contacted with further instructions.
What Should Businesses Do?
If your company has an open enquiry or appeal regarding R&D tax relief, it is advisable to:
- Review the updated guidance to understand how these changes may affect your claim.
- Assess the classification of any funding received for R&D projects to determine if HMRC’s new stance applies to your situation.
- Check subcontracting agreements to ensure they align with HMRC’s clarified position on eligible R&D activities.
- Await further communication from HMRC if your claim is under review.
For more information, you can read the full guidance at:
🔗 CIRD81650 – Subsidised Expenditure
🔗 CIRD84250 – Subcontracted R&D