In April 2023, the R&D tax relief scheme experienced a range of reforms, including adjustments to R&D tax rates, as well as the addition of new qualifying costs. And more developments are on the way, with HMRC releasing further guidance on the new additional information form, which will be compulsory from 1 August 2023.
From August 2023, the process of filing an R&D claim is changing. HMRC require that all companies submit an Additional Information Form as supporting evidence for an R&D claim before the Company Tax Return. You can view the full guidance here.
What is the Additional Information Form?
It is essentially a replacement for the current R&D claim report. In today’s world, an R&D claim report isn’t required; however, it significantly improves the quality of an R&D claim and reduces the chance of an HMRC enquiry.
Rather than attaching a PDF to your CT600, the Additional Form is an online version of the claim report that gets submitted directly into HMRC’s systems. After 1 August 2023, HMRC will reject any claims not submitted through the Additional Form, which needs to be done before the Company Tax Return.
As per the name (Additional Form), HMRC will require some additional information to process an R&D claim benefit, and this is summarised below. But first, it’s important to understand the current supporting evidence shared with HMRC within a typical claim report.
What is typically included in a claim report:
- Determine which scheme the claim is in (SME, RDEC or both).
- The claim benefit calculation is based on the total qualifying spend, scheme and accounting position of the company.
- Summary of competent professionals involved in the R&D.
- R&D project narrative summary to showcase the R&D undertaken within the financial period. This summary demonstrates:
- The baseline technological/scientific knowledge,
- Technological/scientific uncertainties faced
- And technological/scientific advances within each sample project.
- Analysis and breakdown of the R&D qualifying costs.
- Highlight the methodology of the claim preparation process.
What HMRC now requires in the new Additional Form:
- Contact details of the main senior internal R&D contact in the company who is responsible for the R&D claim
- Contact details of any agent involved in the R&D claim
- VAT registration number
- Employer PAYE reference number
- Unique Taxpayer Reference (UTR)
- Identification of business type, for example, your current SIC (Standard Industrial Classification) code
- A breakdown between direct and indirect qualifying R&D activities
- Some additional cost categories for accounting periods starting after 1st April 2023 (cloud computing, data licence costs)
- List the total amount of R&D projects in the financial year.
- A breakdown of the R&D costs allocated to each R&D project
- A standardised set of questions for each R&D project narrative:
- What is the main field of science or technology?
- What was the baseline level of science or technology that you planned to advance?
- What advance in that scientific or technical knowledge did you aim to achieve?
- What scientific or technological uncertainties did you face?
- How did your project seek to overcome these uncertainties?
When should I submit the Additional Information Form?
The additional information form will need to be sent to HMRC before submitting the company’s Corporation Tax Return. If this doesn’t happen, HMRC will write to the company to confirm that they’ve removed the claim for R&D tax relief from the Company Tax Return.
To clarify, if you’ve already submitted your tax return and later submit the additional information form, you’ll need to file an amended tax return. The previous tax return will be replaced by the amended one. This makes it in line with HMRC’s guidance.
For more clarification on this, get in touch with one of our experts today, who will be happy to talk you through the new process.
What does this mean for my claim moving forward?
If you do your claim in-house, ask yourself if the new process is similar to how you’ve been claiming. Perhaps you’ve not even submitted a report to accompany your tax return. If not, it might be time to seek help from R&D specialists. A specialist’s process is more aligned with the new method implemented by HMRC.
If you’ve been working with a provider or accountant, make sure to ask them about the new Additional Information Form. If they appear vague or haven’t heard about it, this demonstrates a lack of knowledge, which isn’t a good sign and could affect your ability to claim.
This is a big step; it doesn’t just change the submission process but also how you collect and link activities.
How is EmpowerRD preparing for the Additional Information Form?
While the Additional Information Form is a significant change to R&D tax relief, EmpowerRD has been working fast behind the scenes to ensure we’re prepared for the reform.
Since our process is already closely aligned with the new Additional Information Form, we’ve been able to expedite changes to our Platform. As a result, we can cater to the latest requirements, and we continue to update our data collection methodologies to ensure we submit R&D claims that are compliant and optimised in accordance with the changes coming on 1 August 2023.
Seeking a trusted partner to help you build your R&D tax claim?
We’re here to help. Over 1000 UK companies have trusted EmpowerRD’s R&D platform and specialists to help them build optimised, compliant R&D tax claims. Please get in touch with one of our experts today if you have any further questions.