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Research: Media businesses challenged by HMRC over R&D claims

May 20, 2024

Research by leading audit, tax and consulting firm, RSM UK, has highlighted the hurdles media businesses face when claiming research and development (R&D) tax reliefs. In a recent survey of media firms, 40 per cent had made at least one claim for R&D tax relief. Of these businesses, less than a quarter (24 per cent) had R&D claims approved by HMRC without challenge in the past year. A third (33 per cent) had a claim which was challenged before HMRC finally approved it, and a further third (33 per cent) had at least one R&D claim declined by HMRC in the last 12 months.

Constantine Costas, tax partner, RSM UK, said: “This research is concerning, as it suggests media businesses are struggling to make successful claims for research and development tax reliefs. These reliefs provide a vital lifeline to encourage businesses to develop new innovative technologies, which benefit their customers, their businesses, and the media industry as a whole.”

HMRC recently reported that it currently challenges around 20 per cent of R&D claims overall, indicating that media businesses in particular are struggling to access the right advice needed to make their claims effectively.

Almost all media businesses surveyed (95 per cent) had claimed some form of tax relief, with almost half (46 per cent) claiming creative sector reliefs and 35 per cent claiming Patent Box to offset the costs associated with undertaking groundbreaking research and development. Only 5 per cent of those surveyed said they hadn’t claimed any type of tax relief, demonstrating that the vast majority of media businesses rely heavily on the incentives these reliefs provide.

The reduced credit rate now offered under the new merged R&D tax incentive regime is also likely to reduce UK PLC’s competitiveness with other countries, particularly compared with near neighbours such as Ireland, which has a 30 per cent R&D credit relief vs 15 per cent for the new UK rate.

Costas continued: “The reduced credit relief, combined with increasing volumes of R&D enquiries that take too long to process, are holding the UK media industry back from competing internationally. To encourage innovation in the sector and improve the UK’s ability to compete, the Government needs to have a focused and efficient enquiry process, and must work to raise awareness of the support available to businesses.”

To improve the chances of a successful R&D claim, media businesses are advised to:

– Check the credentials and qualifications of advisors
– Don’t assume because a claim has been processed by HMRC it is free from error or risk. Claims can still be open to enquiry and are sometimes declined later
– If not confident in the application for R&D credit, seek a second opinion from a trusted advisor
– Make sure to fully understand the rules around claiming.

Costas concluded: “Making an R&D claim is more complex than ever, so seeking support from a trusted advisor with appropriate credentials is key to ensuring successful current and future claims.”

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