R&D Tax Relief Scheme – Upcoming Changes for April 2023
The Research and Development Communication Forum (RDCF) met in July 2022 to discuss the various announced changes which are to be made to the R&D Tax Relief scheme from 1 April 2023.
But what are the upcoming changes? Our latest blog explores what businesses should expect when the new R&D tax relief scheme changes are rolled out from 1 April 2023.
What are the upcoming changes in the R&D tax relief scheme?
These changes include, but are not limited to:
- Cloud and data costs are allowed as qualifying R&D expenditures
- R&D to be expanded to include pure mathematics research
- Restrictions on overseas sub-contractor costs (albeit exemptions if “it is unavoidable for the R&D activity to be undertaken overseas.”)
- A standardised format of information to be provided
- Senior Company Officer sign off the R&D claim
The most significant discussion point of change from The Research and Development Communication Forum (RDCF) meeting was the new requirement for claimant companies to inform HMRC of their intention to make an R&D claim in advance. As of writing, the specific timescale of the ‘advanced notification‘ had not been provided by HMRC.
What is the ‘advanced notification’ I have to give HMRC about my R&D claim?
For R&D claims with accounting periods commencing 1 April 2023 and onwards, companies or their agents will need to indicate to HMRC of their intention to make a claim.
Currently, an organisation can make a claim up to 2 years after the accounting year-end date, to which the claim relates, without any prior indication to HMRC that it intends to do this.
How much notice to HMRC do I have to give about my R&D claim?
The new changes implemented from 1 April 2023 mean that businesses are being advised to notify HMRC that they will be making a claim within 6 months of the accounting year-end.
The advanced notification will be made digitally.
The requirement to notify HMRC of an intention to make an R&D claim will only apply to new claims or organisations that have not yet made an R&D during the three previous years.
If the organisation is a regular claimer of R&D Tax Relief, there is an expectation from HMRC that they will make a claim year on year or every two years and so there is no need to advance-notify.
Is there any flexibility with the 6-month ‘advanced notification’ deadline?
When analysing recent guidance, there does not appear to be any flexibility or leeway in the 6-month notification period. HMRC has taken the opinion that if you miss the 6-month advance notification deadline that you simply can’t make the claim for that year.
Organisations will need to be proactive in identifying R&D projects in year and as they arise and not as part of their post-year Corporation Tax Return preparation, which can be up to 12 months following the accounting year-end.
There does not appear to be any restriction to a business making an advanced notification and subsequently not submitting a claim. If this is the case, the company will then may be required to make a further advanced notification, if it does wish to make an R&D claim for the following year.
The time to act is now
If you are an organisation which undertakes research and development or creates novel solutions using science and technology and have not made an R&D Tax Relief claim before, you should contact your accountant to agree on a process of ongoing in-year project review.
‘Advanced notification’ may also have the effect of removing some less scrupulous firms which set out to somewhat inflate R&D claims, as they will need to be proactive in the year to identify qualifying projects and not just step in 18- 24 months after the year end and try to pull together a claim from the accounting records.
The six-month advanced notification may rule out many eligible organisations from making an R&D claim, especially those who engage accountants who are not fully versed in this specialist area of taxation and so do not have the experience to identify R&D activities in the year.
How can MHA Moore & Smalley help?
We have R&D specialists who advise our clients on this specialist area of taxation. For a free consultation on how we can help you and your business, please fill in the form below: