What area of tax legislation would you change? Part 4

We recently asked some of our tax partners and senior tax managers which area of tax legislation they would change and why, if they were given the opportunity. Scott Burkinshaw, Andrew Grant, Adrian Dunkley, Rachael Dronfield, Chris Chambers and Matt Goodchild gave us their thoughts, and now Dawn Sharman and Caroline Hawkins share their ideas.

Caroline Hawkins
Senior Tax Manager

I would increase the guidance available to companies who may be eligible to claim R and D tax relief. This is a very valuable relief – currently SMEs can claim an additional deduction of 125% of qualifying expenditure against their taxable profits and this is to increase to 230% from 1 April 2015. Despite being in existence since 2000, the most recent figures from HMRC show that only 15,120 companies claimed the relief in 2012-2013.

There is a common misconception that only companies operating at the highest end of cutting edge science and technology can claim – that R and D tax relief is only available for those working in white coats in laboratories. In actual fact, the regime is open to any company which is making a scientific or technological advance in its field and whilst we most commonly see this in the manufacturing and technology sectors, anyone developing innovative products or processes may be eligible to claim.

Revised and additional guidance from HMRC would help companies access this relief and whilst the new ‘clearance’ process announced in the Autumn Statement will help with this, it will be interesting to see how the resource-constrained R and D Units will deal with this new process. Shorts have had success making claims amounting to £m’s for a variety of clients across a wide range of sectors so please get in touch if you feel your company is making technological advances which none of your competitors are!

Dawn Sharman
Senior Tax Manager

If given the opportunity, I would reintroduce indexation relief for capital gains tax. Indexation relief took the original cost of an asset, and inflated it to a realistic present value, which often had the effect of significantly reducing the taxable gain.

In the budget statement of March 2008, the Chancellor announced that indexation relief would be abolished for the calculation of tax on disposals, except those held by a company.   We are now left, in a supposed area of simplification, with two systems dependant on the legal ownership of an asset as companies continue to have indexation relief and individuals do not.

However, I always advise clients to contact Shorts and consider any tax planning opportunities which may be available before taking any action (i.e. the disposal of an asset)