New procedures for R&D Tax Credit Claims

The government is keen to incentivise companies to carry out R&D activities and tax relief is offered as part of their overall approach in pursuit of this.

However, R&D tax relief is an area that is seeing a lot of developments. In addition to changes to the rates of relief, and the expenditure that qualifies for relief, HMRC have introduced new rules that change how and when companies can make a claim.

Additional information form

From 8 August 2023, an ‘additional information form’ must be completed and submitted to HMRC for all R&D tax relief claims, irrespective of the claimant company’s accounting period. The form must be completed before the corresponding tax return is submitted. If this is not the case, HMRC will remove any R&D claim included on the tax return.

The additional information form will require details such as:

• Company information & reference numbers (including PAYE, VAT and the UTR)
• Contact details for both the main internal R&D contact & any agent assisting with a claim
• Specifics regarding qualifying expenditure (direct and indirect)
• Narratives for up to 10 projects, describing the activities and why they qualify for relief

Some of the details will be duplicated from the R&D report, which is usually prepared to support a claim and companies currently making claims will be familiar with. We would recommend a report is still prepared and submitted to HMRC, in addition to the additional information form, as it will still provide HMRC with a lot of background detail that would otherwise be missing if the additional information form is submitted in isolation.

Claim notifications

Furthermore, for company tax returns beginning on or after 1 April 2023, a claim notification may be required in order for a subsequent R&D tax relief claim to be valid.

To submit a claim notification, the following details will be required:

• The company’s UTR
• Contact details for both the main internal R&D contact & any agent assisting with a claim
• The relevant tax return period and financial statements reporting period
• A summary of the high-level planned activities

This notification must be made within 6 months of the end of the financial statements reporting date (known as the end of the “claim notification period”).

A claim notification will be required if:

• The company is claiming for the first time or
• A claim has not been submitted within 3 years of the end of the claim notification period

There are a number of permutations, especially if there are short or extended accounting periods, and if a notification period is missed, it could block the company from claiming R&D tax relief. We would therefore recommend early engagement with us if your company is considering a project that may qualify for relief.

It is not uncommon for companies to make R&D tax relief claims close to the deadline of 2 years after their financial statements reporting date. Companies who are starting new projects which may qualify for relief must now, at an earlier stage, be considering whether a claim notification should be made – the 2 year filing deadline is 18 months after the end of the claim notification period in most cases, which is clearly too late.

If you would like guidance on the new procedures for R&D Tax Credit Claims, please get in touch.