TTR Barnes

The R&D Tax Relief Scheme is a valuable tax relief for those eligible businesses investing in new product development or innovation.  From 1^st August 2023 you will need to submit claims digitally and provide Additional Information to HMRC using a prescribed online form. In this article we explain the new requirements from August this year. 

Additional Information Submission

From 1^st August 2023 all companies claiming R&D tax relief or expenditure credit will need to submit an additional information form to HMRC.

This should be prior to submission of the company Corporation Tax return, otherwise the R&D tax relief claim will be removed from the return.

Information Required on the Additional Information Form

The following information must be provided with the form:

1.    Basic Company Information

• Unique Taxpayer Reference (UTR), this must match the one shown in your Company Tax Return
• Employer PAYE reference number
• VAT registration number
• Your business type (e.g. SIC code)
• The main senior internal R&D contact in the company responsible for the R&D claim
• 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, this must match the one shown in your Company Tax return

2.    Qualifying expenditure details

Depending on how you meet the conditions, you may claim for either or both of the below:

• Tax relief as a Small- or Medium-sized Enterprise (SME)
• Expenditure credit as a large company or SME

Within the SME tax relief category, you may claim for items such as cloud computing costs and data licence costs (from periods on or after 1^st April 2023), consumable items, software, staff, externally-provided workers or subcontractors and clinical trial participant payments.

Within the expenditure credit category you may also claim for items such as cloud computing costs and data licence costs (from periods on or after 1^st April 2023), consumable items, software, staff, externally-provided workers or subcontractors and clinical trial participant payments.  You may also claim for contributions to independent R&D costs.

3.    Indirect Activities

You may also include the total of any indirect activities for each project, even if they do not directly lead to resolving the uncertainty, including:

• Creation of information related to R&D support such as report preparation
• The share of any activities that support the R&D project, such as maintenance, security, administration & clerical activities and finance & personnel activities
• Any ancillary costs required to start the R&D process needed to begin R&D e.g. staff, leasing laboratories and maintaining R&D equipment
• Any training necessary to directly support the R&D project
• Any university research by students or researchers
• Any research where the research is not R&D in its own right
• Any feasibility studies to inform the strategic direction of a specific R&D activity

4.    Project details

You should include the total and details of all projects for which you are claiming within the accounting period.  Depending on the number of projects for which you are claiming, you will need to submit varying information:

• If you are claiming for 1 to 3 projects, then you will need to describe all the projects you’re claiming for that cover 100% of the qualifying expenditure
• If you are claiming for 4 to 10 projects, you will need to describe any projects that account for at least 50% of the total expenditure, with a minimum of 3 projects described
• If you are claiming for 11 to 100+ projects, you will need to describe any 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, then the 10 largest should be described

If you’re a large business customer
If you qualify within the Large Company or SME category then you should read the CIRD85100 Large Business Practice Notes in the Corporate Intangibles Research and Development Manual and direct any questions to the large business directorate, copying in your Customer Compliance Manager (CCM).  Further supporting details can also be provided in a separate report via email or online with your Company Tax return.

5.    A Description of each Project

You should also submit a description of each project, covering the following:

• The main field of science or technology
• The baseline level of science or technology that the company planned to advance
• The advancement in scientific or general knowledge that the company aimed to achieve
• Any scientific or technological uncertainties that the company aimed to tackle
• How the project sought to overcome these uncertainties
• The tax relief that is being claimed for and the amount

Submission of Additional Information & R&D Tax Credit Claims

From 1^st August 2023, all R&D tax credit claims should be made digitally (except those exempt from submitting a Company Tax return online) and the Additional Information form should be submitted through the new online portal separately from the main Corporation Tax return.

You can submit the Additional Information form so long as you are a representative of the company or an agent and have access to your Government Gateway account.

Summary

It is key to understand these changes to the way you claim for R&D tax credits as HMRC has stated they will classify those claims not meeting the criteria as ineligible and remove them.  The August 2023 changes to the R&D Tax Relief regime come amid a host of other changes over 2023 and 2024, implemented by the government to increase investment in R&D by companies across the UK and also to tackle suspected abuse of the incumbent scheme.

A controversial potential merged scheme, combining the current SME and RDEC schemes, has also been proposed for a 2024 implementation, to both simplify and support overall investment in R&D, as well as enable better policing and monitoring of R&D claims.

With multiple changes to the R&D tax relief regime over 2023 and 2024, you should ensure you are aware of how they may impact your financial projections as well as making sure you are following correct processes going forward.  As a valuable tax relief for any business investing in innovation or new product development, full understanding R&D tax credits could prove vital for your business.

All information correct at time of going to print/live and on the best knowledge and understanding of the author at the time. This article is for general information only and does not constitute financial advice or recommendations for individual circumstances. No responsibility is taken for any actions taken on the base of the information within this article.