Tax news in brief

Highlights from the broader tax news week ending 13 January, which includes: ICAEW’s response to draft legislation on R&D tax relief for SMEs and £230,000 cap on participation in the agricultural flat rate scheme for VAT.

ICAEW reiterates concerns over proposals for R&D tax relief for SMEs

ICAEW has responded to the draft legislation published on 12 November 2020, expected to be included in Finance Bill 2021, intended to prevent abuse of R&D relief. ICAEW reiterated concerns raised in its response of 24 August 2020 to the previous consultation paper.

ICAEW is concerned that there is no mechanism for amending the maximum claim allowed where PAYE & NICs on which the credit cap is based are ultimately not paid. ICAEW also feels that the intellectual property exception could be made clearer, particularly the meaning of performing significant management activity in relation to relevant IP held by a company. Read more.

£230,000 cap on participation in the agricultural VAT scheme

Following amendments after the end of the Brexit transition period, HMRC has further updated VAT Notice 700/46 on the agricultural flat rate scheme. On 11 January, HMRC amended eligibility criteria for the scheme, meaning that only businesses with an annual turnover from farming activities of less than £150,000 can join the scheme. The changes also confirm that when a business’s annual turnover from farming activities exceeds £230,000 they have to leave the scheme. Read the updated guidance.