2009 amendments fine-tune the administration of the research and development tax credit.
Sections CX 48D, LH 1(3), LH 2(7), LH 14B, OB 4(3)(eb), OB 32(7), OB 33(5), OB 37, OC 16, OK 2(3)(cb), OK 12(7), OK 13(5), OK 14B, OP 7(3)(fb), OP 30(5), OP 31(5) and OP 35 of the Income Tax Act 2007; sections 3, 68D, 68E, 68F, 89AB, 89D(2E), 89DA(3), 108(1B), 113D(2), 173L(2)(bb), 173L(3) and 177B(7) of the Tax Administration Act 1994
The amendments fine-tune the administration of the tax credit.
Filing on behalf of partners (sections 68D and 68E)
Partners are required to file individual detailed statements supporting an R&D tax credit claim including contributions to R&D performed on behalf of a partnership and R&D done on their own account. This amendment streamlines the filing process for R&D returns for situations when a partner is a member of more than one partnership doing R&D, and particularly when they are also in an internal software development group.
Switching off certain return requirements for the detailed statement (section 68F)
Some of the requirements and consequences of being a return are switched off for detailed statements – namely, the requirements to sign and retain a hardcopy transcript of the detailed statement for seven years. The amendments also make it clear that the position taken by claimants in the detailed statement do not amount to the claimant taking a tax position. This ensures that shortfall penalties do not apply from the calculations in the detailed statement. Shortfall penalties will continue to apply to R&D tax credits claimed in an income tax return.
Response periods for notices related to R&D tax credits (sections 3 and 89AB)
The core definition of “response period” has been moved from section 3(1) to a new section 89AB of the Tax Administration Act 1994. Time periods for filing notices of proposed adjustment (NOPAs) that relate solely to an amount of R&D tax credit have been amended so that they are consistent with other time limits for those credits. Claimants have two years from the final date for filing a tax return for an income year to file a NOPA that relates solely to an amount of R&D tax credit for that income year. There is no change to response periods in the case of notices that do not relate solely to an amount of R&D tax credit.
No dispute of an R&D amount until detailed statement provided (sections 89D(2E) and 89DA(3))
Claimants cannot dispute an assessment of an R&D amount until an R&D detailed statement (under sections 68D or 68E) has been provided for the tax year. This will ensure that Inland Revenue has the necessary information about a claimant’s R&D activities before a dispute commences.