Changes to R&D Tax Relief Claims from 8th August 2023 – What You Need to Know

Why are changes being made to the R&D tax credits scheme?

The UK’s R&D tax credits scheme is great for businesses, and when the scheme is used properly, it can be a significant driver of innovation, growth, value, and profits for a business.

Unfortunately, some businesses and tax credit ‘agents’ have been taking advantage of the system in recent years by making fraudulent or over-inflated tax relief claims.

HMRC has been under significant scrutiny to tackle fraud and abuse of the R&D tax relief system and has now started to crack down significantly on any fraudulent activity.

That’s why HMRC are dramatically changing the R&D tax credit system and the way businesses make a claim. They are effectively trying to raise the bar so that fraudulent claims and suspect tax credit agents can no longer prosper.

Companies with legitimate R&D claims, or who want to use R&D and innovation as a key part of their business strategy, have absolutely no reason whatsoever to stop submitting their R&D tax credit claims.

In fact, for legitimate claims, the aspects of research that can be claimed for are being broadened in scope. For example, costs linked to data licensing, cloud computing and mathematical advances will now qualify for R&D tax relief when, historically, data purchased and used in the R&D process could not be claimed.

What’s Changing on 8th August 2023: Additional Compulsory Information Form (Online)

Historically, as part of the CT600 corporation tax filing, companies would tick a box saying that they were claiming for tax credits, often without providing a great deal of detail to support that claim.

From 8th August 2023, any Research and Development (R&D) tax relief claim must now be supported by an ‘Additional Information Form’ submitted to HMRC using the online government gateway – irrespective of the accounting period to which the claim relates.

This requirement applies to claims made under both the SME and RDEC schemes.

Importantly, the form must also be endorsed by a named senior officer of the company and must include details of anyone who has assisted with the claim such as an agent.

If the ‘Additional Information Form’ has not been completed, HMRC have confirmed that the R&D claim will be invalid and they will have the power to remove the claim from the company’s tax return.

The new online form will need to include:

1. The company’s unique taxpayer reference (UTR) – this must match the company’s tax return, employer PAYE reference, VAT registration number and SIC code;

2. The contact details of the main senior internal R&D contact (i.e. the company director) and any agent involved in preparing the claim;

3. The accounting period start and end date;

4. The scheme the claim is being made under (SME or RDEC);

5. Qualifying expenditure breakdown: Including total expenditure claimed for each qualifying project and qualifying indirect activities (QIA) for each qualifying project.

6. The number of projects claimed for and details of the claims.

Qualifying project descriptions must include information as to:

• The main field of science or technology your project relates to.

• The baseline level of science and technology at the start of your project.

• What advance in that scientific or technological knowledge your company aimed to achieve.

• The scientific or technological uncertainties faced.

• How your project sought to overcome these uncertainties.

• Additional information can be provided to supplement what is required for the form. This can include details of claim methodology (including sampling method) and details of your competent professionals.

Identifying the agent who helped to prepare your R&D claim

Historically, anybody could support your business to make an R&D tax credit claim.

Agents would make recommendations and help you fill out the claim form, but then take no responsibility for the claim being accepted by HMRC, and the onus was on you to sign off on the claim.

Crucially, these agents would have very little accountability if the claim was challenged by HMRC.

This has now changed.

Anyone who supports a business to make a claim must now be registered with HMRC, they must have their details logged within the HMRC database, and effectively, they must take some responsibility for the claims that they make on behalf of a client.

This is a major change and should remove many suspect players from the marketplace.

Unscrupulous agents who have been pushing the legislation beyond breaking point, finding and submitting claims that they know to be beyond the government’s R&D remit will no longer be able to operate with the level of impunity they have up until now.

Choose a regulated accountancy practice to help with your R&D claim

The Uncommon Practice have entered into a strategic alliance with Leonherman to support our clients with any R&D claims.

We know that having an R&D claim reviewed or challenged can create significant costs and delay for a business. In our experience, this is far more likely if your claim has been compiled by questionable R&D expert.

Leonherman are regulated by the Institute of Chartered Accountants in England and Wales and are used to operating under regulatory scrutiny and with the levels of accountability that will now be found in the R&D tax credit market. The same cannot be said for a lot of the agents found in the R&D tax credits market.

In short, if you need to submit an R&D claim, you can leverage Leonherman’s experience of working in a regulated environment, safe in the knowledge that your R&D claim will go forward with confidence and responsibility.

Here’s how Leonherman can help you to reduce the risk to your business:

1. They will meet with you to help you better understand what work aspects can and cannot be considered towards a claim for R&D Tax Credits;

2. They will ensure the work that you’ll be putting forward for a claim is structured accordingly into the relevant process elements of R&D, to ensure that the maximum potential claim value can be harnessed;

3. They’ll ensure your research is well documented in a manner that supports a review of the research by HMRC should they deem it necessary;

4. They will help you to engage legal advice, to ensure contracts with third parties, be they clients or subcontractors, enshrine the ownership of the research with you, the claimant;

5. As a regulated, independent specialist, Leonherman will compile your R&D claim, report and HMRC AIF, maximise the claim value and ensure key HMRC tests for any valid claim are met.

Considering an innovation project? Is it eligible for R&D tax relief?

If you’re considering an innovation project in your business, and you’re unsure as to whether you will have a valid R&D claim or not, please get in touch with the Uncommon Practice today and we will refer you to the expert team at Leonherman.

They will help you better understand what constitutes a valid claim for R&D tax credits with HMRC and will let you know if they think you will have a valid claim. Importantly, they will tell you if they think you don’t have a valid claim and whether they feel it’s worth your time putting forward a claim or not.

Important Disclaimer

This material is published for information. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. No responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by The Uncommon Practice.