HMRC gets tough on tax break

Date: 15th July 2009

Small businesses could potentially suffer financially as a result of an HM Revenue & Customs (HMRC) policy change, it has been suggested.

The firms are now obliged by the tax authority to hold both their intellectual property and research wings in the same individual business unit if they are to claim certain tax breaks, the Financial Times reports.

However, some companies prefer to split these functions - a move often advised by lawyers and accountants as being commercially beneficial over the long run.

HMRC told the Financial Times that the rules governing the tax breaks had not themselves been changed, but confirmed that it was now taking a stronger stance on the issue among small businesses.

A spokesman added that this policy change was a "consultation exercise", due to run for some weeks.

At the same time, this change is not being applied to larger businesses - meaning that they can keep their research and intellectual property functions separate and still get a tax break.

Also speaking to the newspaper, Richard Bell at UK chemicals business Byotrol added: "[The rule change] doesn't strike me as something that has come out from the field.

"The research and development officers we have to deal with are all very helpful."