R & D reporting changes and why it pays to file your claim early

In the March 2023 Budget, HMRC announced that two additional reporting requirements would be introduced for companies wishing to make claims for Research and Development (‘R&D’) tax relief.  Businesses should be aware that these rules are about to come into force. The aim is to combat perceived abuse of the schemes, although inevitably the changes will result in an increased compliance burden for many companies.

1. R&D notification

The first change is a new requirement to submit R&D notifications.

This applies for accounting periods beginning on or after 1 April 2023. Companies will need to notify HMRC (within 6 months of the end of the period of account) that they intend to make a claim, where:

i) The company is claiming for the first time; or
ii) The company claimed in the previous year, but did not submit the claim within six months of the end of the period of account; or
iii) The company’s previous claim was made more than three years before the last date of the claim notification period.

The notification is made using an online form i.e. separate to the corporation tax return.

Important:  If a notification is required and the six-month deadline is missed, the R&D claim will be invalid.

2. Additional information form 

An additional information form will be required for all R&D claims made on or after 1 August 2023. The form must be submitted before filing the company’s corporation tax return, otherwise HMRC will not process the R&D claim. 

The information is also required to be provided via HMRC’s online system and has to include high level details of the company’s R&D activities.

Example

A UK company, Innovations One Ltd, has a 31 December year end. The company tends to submit its corporation tax return and R&D claims in August each year i.e., eight months after the year end.

The table below shows how the R&D changes will impact the company’s reporting obligations as follows over the next few years:

Accounting period endedR&D notification required?Additional information form required?
31 December 2022No
(as the accounting period commenced before 1 April 2023)
Yes if the R&D claim is submitted on or after 1 August 2023
31 December 2023No
(as the accounting period commenced before 1 April 2023)
Yes
31 December 2024Yes if the previous R&D claim was submitted after 30 June 2024Yes

Forbes Dawson view

Companies can avoid the requirement to complete an additional information form this year if their R&D claim is submitted before 1 August 2023. With just under a month to go before the deadline, this should incentivise companies to submit their claims as soon as possible to reduce the compliance burden.

In future periods, companies should aim to submit their R&D claims within six months of their accounting period end, as this will remove the requirement to prepare an R&D notification in the following period.  Where notifications are required, it is vitally important that these are made within the six-month window following the relevant period otherwise the ability to claim will be lost.

Despite the requirement to submit additional information, we recommend that companies continue to prepare detailed R&D reports to send in alongside their corporation tax returns. These reports evidence that claims have been properly considered, which reduces the chance of HMRC enquiry.

As a final piece of compliance, companies will now need to ensure the notification/additional information tick boxes within the CT600 are completed before filing their returns.

If you would like any assistance with R&D matters, please do not hesitate to contact us.

 

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