Major changes to R&D tax relief

If you have a company and are considering or are currently claiming Research & Development (“R&D”) tax relief, you need to know about the changes that have been made to the scheme.

There are two important procedural changes to claiming R&D tax relief. If the new requirements are not met, a company’s R&D claim will not be allowed.

Additional information form

Applying from 8 August 2023, an additional information form must be submitted to HMRC to support all claims for R&D tax relief or expenditure credit. This form has to be submitted before the company’s corporation tax return is submitted. If this is not done, HMRC will remove the R&D claim from the tax return.

The form is submitted online and the following information needs to be provided:

  • Company details, including the UTR, PAYE reference number, VAT registration number and business type.
  • The name and contact details of the individual in your company who is responsible for the R&D claim and any agent.
  • The accounting period.
  • Details of the qualifying expenditure.
  • The number and details of all the projects that you’re claiming for. If you’re claiming:
    • for 1 to 3 projects, you need to describe all the projects you’re claiming for that cover 100% of the qualifying expenditure;
    • for 4 to 10 projects, you need to describe those projects that account for at least 50% of the total expenditure, with a minimum of 3 projects described; and
    • for 11 to 100 (or more) projects, you need to describe those projects that account for at least 50% of the total expenditure, with a minimum of 3 projects described — if the qualifying expenditure is split across multiple smaller projects, describe the 10 with the most qualifying expenditure.

The projects should be described under 5 key headings.

1. What is the main field of science or technology?

2. What was the baseline level of science or technology that the company planned to advance?

3. What advance in that scientific or technological knowledge did the company aim to achieve?

4. The scientific or technological uncertainties that the company faced.

5. How did your project seek to overcome these uncertainties?

When considering what to include in the description, we recommend referring to the guidelines on the meaning of R&D for tax purposes at Meaning of research and development for tax purposes: guidelines – GOV.UK (www.gov.uk) – HMRC are increasingly scrutinising R&D claims which can lead to lengthy enquiries and ultimately to claims being denied.

As you can see, the new form will take time to complete, so we strongly recommend not leaving it until close to the submission deadline!

Advance notification of intention to make a claim

If you’re planning to claim R&D tax relief or expenditure credit for accounting periods beginning on or after 1 April 2023, you must submit a claim notification form if:

  • you’re claiming for the first time; or
  • your last claim was made more than 3 years before the last date of the claim notification window.

The “claim notification window” runs from the first day of the relevant accounting period until 6 months after the end of the accounting period.

The notification is submitted online and will include the following:

  • The company’s UTR.
  • The main senior internal R&D contact in the company who is responsible for the R&D claim.
  • The contact details of any agent involved in the R&D claim.
  • The accounting period start and end date for which you’re claiming the tax relief or expenditure credit.
  • The period of account start and end date.
  • A summary of the high-level planned activities.

If the notification is not made within the window, and an R&D claim is subsequently made for a period, HMRC will remove the R&D claim from the tax return.

What should you do now?

If you currently make R&D claims or think that you might make R&D claims in the future, make sure that you understand the new rules. These are very important, as getting it wrong will mean that a claim cannot be made. It is not simply a matter of a penalty or interest, but the potential loss of a valuable tax relief.

If you have any questions on the above or would like to discuss your particular situation, please let us know.