Administration Changes From August 2023, all claims for R&D tax relief have required to be filed alongside an Additional Information Form. This form provides HMRC with information regarding the costs being claimed as well as the R&D activities being undertaken. Additionally, companies which have not made a claim for R&D tax relief in the previous 3 years must submit an advanced notification form to HMRC. This notification must be submitted within 6 months of the end of the company’s accounting period. Why have HMRC made these changes? The R&D tax relief schemes have previously been very generous. Given that this scheme enables some companies to claim a cash refund from HMRC, it has been targeted for fraudulent purposes. In the past only a very small number of R&D claims were checked by HMRC enabling this fraud to expand. However, over the past 2 years, HMRC have put additional resources into their checking of R&D claims. Some estimates say that as many as one in five R&D claims are now being reviewed.
Given the significance of the changes announced and their potential impact on small early-stage companies, a concession has been announced for ‘R&D Intensive Companies’. Broadly these are companies who spend at least 30% of their total expenditure on R&D qualifying costs. These companies will still be able to benefit from the SME scheme rates of R&D relief and be able to surrender tax relief for a repayable tax credit. One further change is the limiting of tax relief to activities and costs incurred on R&D work which is undertaken within the UK. Previously as long as the claimant company was subject to UK Corporation Tax, R&D tax relief could be claimed on qualifying expenditure regardless of where it was carried out. However, for accounting periods starting on or after 1 April 2024, relief is now restricted to R&D undertaken within the UK. This has the potential to impact on a large number of UK businesses so careful planning should be considered for those businesses which are affected.
Therefore, by simplifying the scheme and requiring additional technical information, it enables HMRC to focus their efforts on the claims that require their attention whilst at the same time making fraudulent claims less attractive. How to make a Qualifying Claim for R & D In order to make a compliant qualifying claim for R & D, directors need to acquaint themselves with the R & D criteria relating to their company, or to work with a trustworthy agent who will be able to guide them through the process, and importantly be there for support should HMRC select the claim for detailed scrutiny. At Scrutton Bland, we have a dedicated team who will be pleased to work with you to identify projects eligible for R & D, and to guide you through the process of making a claim. If you would like to discuss an of the changes mentioned in this article, please reach out by emailing hello@scruttonbland.co.uk or calling on 0330 058 6559.
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