R&D tax relief disclosure rules delayed to 8 August

R&D tax relief disclosure rules delayed to 8 August

Jul 23, 2023

HMRC has delayed the introduction of claim notification forms about research and development tax claims by a week to give companies more time to prepare

The enforcement date for new R&D claim notification and additional information requirements has been pushed back by a week to 8 August 2023.

Originally due to come into effect on 1 August 2023, The Relief for Research and Development Regulations 2023 will now be put into law a week later than expected due to delays in Finance Bill timetabling.

For accounting periods starting on or after 1 April 2023, businesses will be required to provide claim notification ahead of a claim for R&D tax relief.

The claim notification must be provided via an online form and submitted no later than six months after the end of the period of account that the claim falls into.

In addition, the rules have been extended to cover qualifying expenditure on data licences and cloud computing costs.

From 8 August 2023, all companies will be required to submit an additional information online form before the company’s corporation tax return CT600 form containing the claim.

If you file the CT600 without the submission of this additional information form, all R&D reliefs will automatically be removed from the CT600.

The following information will have to be included:

  • contact details of the main senior internal R&D contact in the company who is responsible for the R&D claim, for example a company director, and/or any accountant or tax agent involved in the R&D claim;
  • value of the qualifying expenditure for tax relief as a small and medium-sized enterprise (SME), and the expenditure credit as a large company or SME; and
  • a summary of the high level planned activities, for example if you have developed software what it will be used for to show that the project meets the standard definition of R&D.

Nigel Holmes, director of tax at Catax, part of the Ryan group, said: ‘The extension will be very much welcomed by businesses that are yet to start preparing for the additional R&D form. They now have three weeks left to make sure they have all the information required to submit a successful claim.

‘Remember that regardless of when the accounting period was, all claims submitted on or after 8 August need to submit the additional information form to HMRC. Businesses should be careful not to confuse the 8 August deadline with any other R&D changes that are due to come in this year.’

While this new step requires more administrative work, it will allow HMRC to more easily identify fraud and error in claims. The additional information should help to sift out dishonest advisors who have not included sufficient project information in their applications.

Nearly 20% of R&D claims are fraudulent, according to HMRC figures, so it is a priority for the tax authority to get a grip on the claims process and root out fraudsters. In recent years there has been a proliferation of agents offering support with R&D tax relief claims while taking large cuts of the payouts, often for dubious claims.

The increase in reporting will also give HMRC a better overall understanding of the claims being made. ‘By having access to clear claim breakdowns and project justifications, rather than just total qualifying expenditure, HMRC can tackle claims with particular features or from particular sectors,’ Holmes said.

This is a major change to R&D claims and one which will need careful consideration.

Although the HMRC guidance has not been updated, HMRC alerted businesses in their latest Agent Update 110 newsletter issued 19 July.