Major changes for R&D tax relief claims submitted from 1st August 2023
From 1 August 2023, all companies must complete and submit an additional information form to HMRC to substantiate claims for R&D tax relief. The additional information form is required before the submission of the company’s corporation tax return. If this is not provided, HMRC will remove the claim from the tax return. Either the company itself or an agent acting on the company’s behalf is able to file the new form.
This is perhaps the most significant change to the claim submission procedure since the legislation’s inception in 2000.
The form requests basic information about the company such as the company name, accounting period end and company unique tax reference. This information is standard and would be expected of any form of this type. However, there are a few interesting inclusions on the form which are worthy of note. These include:
- Name of and adviser which has assisted with the claim
Company SIC code
The main senior internal R&D contact in the company who is responsible for the R&D claim - The requirement to provide the company SIC code is a particularly interesting inclusion. Only last week, HMRC issued new guidance for R&D tax relief. The guidance states several sectors where it is unlikely that a valid claim will arise. These include care homes, pubs, restaurants and childcare providers. It is clear that HMRC have sector specific concerns about claims – so the request to provide the company SIC code seems a sensible one.
The form also requires a wrath of information about the projects and costs which form the claim. At present, there is no statutory requirement to provide any project information for an R&D tax relief claim but any reasonably competent adviser will produce a report and cost breakdown which provides much of the information that HMRC is making mandatory. Interestingly, HMRC have stipulated how much project ‘coverage’ they require, for claims which contain multiple projects. The rules are
- for 1 to 3 projects, describe all the projects that cover 100% of the qualifying expenditure
- for 4 to 10 projects describe those projects that account for at least 50% of the total expenditure, with a minimum of 3 projects described
- for 11 to 100 (or more) projects, 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 largest
As expected, the new form will require several questions to be answered about the projects which are documented. These questions are very similar to the questions outlined in HMRC’s guidance manual, and which competent advisers have been documenting in their reports for several years. The exact wording of HMRC’s questions on the form is as follows:
- What is the main field of science or technology.
- What was the baseline level of science or technology that the company planned to advance.
- What advance in that scientific or technological knowledge did the company aim to achieve.
- The scientific or technological uncertainties that the company faced.
- How did your project seek to overcome these uncertainties.
The new form will also require a breakdown of qualifying expenditure, per qualifying category (staff costs, consumables, subcontracted R&D etc). This is to be expected. However, one departure from current convention is the requirement to provide a breakdown of expenditure for each individual project, rather than the total expenditure of the claim. Again, many advisers will already be doing this, but it’s not something which HMRC have routinely requested, even when an enquiry is opened into a claim. The requirement to provide a breakdown of expenditure per project is likely to benefit both claimant companies and HMRC, as it may facilitate easier conversations if there is a disagreement about individual projects in a claim, rather than the claim in its entirety.
The new form will undoubtedly increase the administrative burden on both claimant companies and advisers. If your company claims R&D tax relief, make sure 1st August is a date in your diary!
YesTax. Positively Better.