From August 1st 2023, entities claiming Research and Development (R&D) tax relief or expenditure credit in the UK must complete and submit an additional information form to HM Revenue and Customs (HMRC). This additional form will be a prerequisite for supporting all R&D tax relief claims, and failure to submit it before the entity’s Corporation Tax Return may lead to the removal of the claim.
What information?
The additional information form requires entities to provide their Unique Taxpayer Reference (UTR), employer PAYE reference number, VAT registration number, and business type. These details must concur with those on the entity’s Corporation Tax Return. Entities must also provide the contact details of their senior internal R&D contact and any agent involved in the R&D claim. The accounting period start and end date for which the entity is claiming the tax relief must match those on the Company Tax Return.
The form mandates entities to describe all the projects they are claiming for that cover 100% of the qualifying expenditure or those that account for at least 50% of the total expenditure, with a minimum of 3 projects described. For entities claiming for 11 to 100 (or more) projects, they must 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, the entity should describe the 10 largest.
To qualify for SME tax relief, entities may claim for a range of expenses, including cloud computing costs, consumable items, data licence costs, externally provided workers, payments to participants of a clinical trial, software, staff, and subcontractor costs. For expenditure credit, entities may also claim for contributions to independent R&D costs. Entities must include the amount of qualifying expenditure for each project of qualifying indirect activities that do not directly lead to resolving the uncertainty.
If the entity is a large business customer, they should refer to CIRD85100 Large Business Practice Notes in the Corporate Intangibles Research and Development Manual for information on how HMRC deals with expenditure credit claims. In addition to the additional information form, entities can submit a separate R&D report providing further supporting details about their R&D projects, such as the claim methodology, use of sampling, and details of the competent professionals.
What does this mean?
The new additional information form presents a significant change in the way R&D tax relief claims are handled in the UK. While it increases the level of information required from entities, it also serves as an opportunity to improve the transparency and accuracy of R&D tax relief claims.
The additional information form will also have significant impacts on companies moving forward. Companies must ensure they are aware of the new requirements and ensure they are fully compliant. This may require significant changes to the way they gather, process, and report data related to R&D projects. They may also need to invest in new technology or expertise to ensure they can provide the additional information required.
In summary, the additional information form required for claiming R&D tax relief or expenditure credit in the UK from 1 August 2023, mandates entities to provide more detailed information about their R&D projects, including the qualifying expenditure, indirect activities, and project details. Companies must ensure they are aware of the new requirements and meet the deadlines for submitting the additional information form and the Corporation Tax Return to avoid any delays or potential removal of the claim by HMRC. The additional information form presents a significant change in the way R&D tax relief claims are handled in the UK and provides an opportunity to improve the transparency and accuracy of R&D tax relief claims.
Next steps
If you’re not already claiming R&D, you could be one of the estimated 90% of eligible companies that aren’t currently taking advantage of the R&D scheme. If you’re unsure if you’re entitled to a claim, or you’d like more information on how these changes will affect you or your business, then please do get in touch with us.
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