HMRC are increasingly clamping down on R&D claims as demonstrated by the recent changes which we have previously discussed in our article on the reforms. As a result, more compliance is now required by companies submitting claims of which the most notable are advance notification and additional information forms.
Advance Notification
For accounting periods beginning from 1st April 2023, companies must inform HMRC of their intention to submit an R&D claim no later than six months after the end of the accounting period to which the claim relates. In practice, the earliest claims that this will affect are those relating to an accounting period that ends 31st March 2024. For these claims, the company would have until 30th September 2024 to notify HMRC of their intention to submit a claim. The advance notification should include a high-level summary of the activities planned to demonstrate it meets the definition of R&D. No proof or documentation would need to be submitted at this stage.
An exception to the rule is if a company has made an R&D claim in one of the 3 preceding accounting periods, in which case they don’t need to give advance notification.
If advance notification should have been given but wasn’t and a claim is then included in the tax return without it, HMRC will remove the claim as an error so it is key to ensure companies are up to date with their potential claims.
Additional Information
The extra information that will need to be submitted will include the following:
- Information about the company such as the Unique Taxpayer Reference (UTR), employer PAYE reference number, VAT registration number and business type, for example the current SIC (Standard Industrial Classification) code
- 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 any agent involved in the R&D claim
- Details of qualifying expenditure including qualifying indirect activities such as supporting activities such as maintenance, security, administration and clerical activities and finance and personnel activities, for the share that relates to R&D
- Details of the projects included in the R&D claim which vary depending on the number of projects as follows:
- for 1 to 3 projects, describe all the projects being claimed for 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 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
Once the information is submitted a reference number will be provided for companies to keep on file as proof of submission and to be used to discuss the information with HMRC if needed. An extra box must also be ticked on the tax return to acknowledge that the advance information has been provided to HMRC.
Summary
It is easy to see why these extra requirements combined with HMRC’s crackdown approach are putting people off claiming R&D. Companies submitting robust claims that have always provided a supporting report to HMRC for the R&D claim, will not see this new approach generating significantly more work, just the completion of a form online containing information that would already have been in the report. The new requirements may possibly deter those companies (and agents) who were submitting speculative claims or claims not adequately supported by robust evidence, but that is exactly what HMRC are aiming for.
If you would like any help with your R&D claims please contact us and we will be happy to assist.
