21/07/23 HMRC Delay New R&D Tax Relief Requirements to 8 August 23

HMRC released an update on 21/07/23 which included a revision to the date on which the submission of additional information forms (AIFs) will become mandatory to support R&D claims. This has now been delayed from 1 August 2023 to 8 August 2023.

The date on which the submission of additional information forms (AIFs) will become mandatory to support R&D claims has been delayed from 1 August 2023 to 8 August 2023. HMRC has updated the guidance originally published on 1 April 2023 to clarify qualifying expenditure details, update the list of ‘qualifying indirect activities’, and clarify project details for 11 to 100+ projects.

From 8 August 2023, all applicants must submit a digital additional information form (AIF) that provides more detailed information regarding R&D projects and expenditures. Claimants will need to submit in-depth descriptions of research and development work on a project-by-project basis, a list of categorised costs and details of indirect qualifying expenditure. Companies must submit the AIF before their Corporation Tax Return, a policy devised presumably to incentivise claimants to consider their R&D tax claims earlier in the financial reporting process.

HMRC has stated that failure to submit the AIF will invalidate an R&D Tax Relief claim and result in automatic rejection. These requirements will make the claims process more complex and time consuming for businesses, especially for those that do not work with specialist R&D tax advisors. Working with experienced consultants is the best way for legitimate claimants to navigate the new technical requirements and to reduce the risk of lengthy HMRC enquiries.

From 8 August 2023, all R&D tax relief claims must be submitted digitally to HMRC.

Our teams have been working hard behind the scenes to prepare for the changes and our new processes are designed to make the transition to the new rules seamless. We will liaise with clients and their accountants to ensure deadlines and relevant procedures are met, as per the latest guidance.

HMRC has published the following AIF guidelines:

When you must submit

From 8 August 2023, you must complete and submit an additional information form to HMRC to support all claims for Research and Development (R&D) tax relief or expenditure credit.

You will need to send HMRC an additional information form before you submit your company’s Corporation Tax Return. If you do not do this, HMRC will write to you to confirm that we’ve removed your claim for R&D tax relief from your Company Tax Return.

You can submit the additional information form before 8 August 2023 if you want to give HMRC more information.

Who can submit

You can complete the additional information form if you’re:

  • a representative of the company
  • an agent acting on behalf of the company.

What information you will need

To complete the additional information form you will need the following details.

1. Company Details

Your company’s:

  • Unique Taxpayer Reference (UTR), this must match the one shown in your Company Tax Return
  • employer PAYE reference number
  • VAT registration number
  • business type, for example your current SIC (Standard Industrial Classification) code.

2. Contact Details

The 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
  • any agent involved in the R&D claim.

3. Accounting Period Start and End Date

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.

4. Qualifying Expenditure Details

Include details of the qualifying expenditure.

If you meet the conditions, you can claim for either or both:

  • tax relief as a small and medium-sized enterprise (SME)
  • expenditure credit as a large company or SME

If you’re claiming for SME tax relief, you can claim for:

  • cloud computing costs, including storage, for accounting periods beginning on or after 1 April 2023
  • consumable items, for example materials, water, fuel and power
  • data licence costs, for accounting periods beginning on or after 1 April 2023
  • externally provided workers
  • payments to participants of a clinical trial
  • software
  • staff
  • subcontractor costs

If you’re claiming for expenditure credit, you may be able to claim for:

  • cloud computing costs, including storage, for accounting periods beginning on or after 1 April 2023
  • consumable items, for example materials, water, fuel and power
  • contributions to independent R&D costs
  • data licence costs, for accounting periods beginning on or after 1 April 2023
  • externally provided workers
  • payments to participants of a clinical trial
  • software
  • staff
  • some subcontractor costs

4. Qualifying Indirect Activities

Include the amount of qualifying expenditure for each project of qualifying indirect activities, that do not directly lead to resolving the uncertainty.

Only include the qualifying expenditure detailed in the section ‘Qualifying expenditure details’, if it was incurred on the following qualifying indirect activities:

  • scientific and technical information services, insofar as they are conducted for the purpose of R&D support, such as the preparation of the original report of R&D findings
  • indirect supporting activities such as maintenance, security, administration and clerical activities, finance and personnel activities, insofar as undertaken for R&D
  • ancillary activities essential to the undertaking of R&D, for example, taking on and paying staff, leasing laboratories and maintaining R&D equipment including computers used for R&D purposes
  • training required to directly support an R&D project
  • research by students and researchers carried out at universities
  • research (including related data collection) to devise new scientific or technological testing, a survey or sampling methods, where this research is not R&D in its own right
  • feasibility studies to inform the strategic direction of a specific R&D activity

5. Project Details

The number of all the projects that you’re claiming for in the accounting period and their details.

If you’re claiming:

  • for 1 to 3 projects, you need to describe all the projects you’re claiming for that cover 100% of the qualifying expenditure
  • for 4 to 10 projects, you need to 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, you need to 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 with the most qualifying expenditure7. Give a description for each of the projects

6. Provide a Description for each Project

HMRC has provided guidelines covering what information is required to accompany each project under the following headings:

  • 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.
  • Which tax relief you’re claiming for and the amount.

Get help with your R&D tax relief claim

Our R&D tax professionals will help you navigate these changes, protect you against non-compliance and prepare strong R&D tax relief submissions that reduce the chance of HMRC enquiries. In today’s regulatory environment, many businesses work with experienced tax consultants to avoid mistakes and to maximise the strength of their R&D tax relief claims.

If you have any questions about the reforms, R&D tax relief in general, or how to make a claim, contact our tax professionals on 0161 904 0044 or team@costcare.co.uk.

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