HM Revenue and Customs (HMRC) has announced that the rollout of the new additional information form that is required to support all claims for Research and Development (R&D) tax relief or expenditure credit has been pushed back by seven days.
Originally set for the 1 August 2023, the new changes will now come into force from the 8 August 2023, giving businesses an extra week to prepare.
Nigel Holmes, Director of Tax, Catax, a Ryan company, explains what businesses need to do to complete a claim.
What additional information is needed?
Before the change, the provision of project information and cost analysis was recommended but optional. Now HMRC makes it mandatory for firms to include the following before submitting their Corporation Tax return:
· Project details – the scientific or technological advances, uncertainties, baseline, and activities undertaken.
· Project costs, including details of qualifying indirect activities.
Why is this change needed?
While this new step requires more administrative work, it is necessary so that HMRC can more easily identify fraud and error in claims. The additional information should help to sift out dishonest advisors who—until 8 August—haven’t included sufficient project information.
This change will also enable HMRC to have 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.
How should businesses prepare?
· Maintain robust recordkeeping – Businesses should be able to discuss all expenditure on a project-by-project basis rather than an overall collective. By having project information captured and readily available, firms will be able to complete the form more easily.
· Start the process early – The new claims process is more demanding and therefore more time consuming. Avoiding last-minute rush can prevent firms from making silly and costly mistakes. If you are using an advisor to complete your claim, consider the time needed to provide them with more information—more calls and email exchange may be needed.
· Consider speaking to an R&D specialist – Some advisors may have made only a handful of claims before, without an accompanying report or comprehensive narrative that’s now expected from HMRC. Consider outsourcing your R&D tax relief claims to a specialist advisor that’s experienced in delivering this level of information to HMRC and already set up to deliver this change.
Holmes adds: “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.”