Understanding Important Reporting Changes for R&D Tax Relief
Tax Reliefs including R&D
If you are a business owner considering or currently claiming Research and Development (R&D) tax relief, there are important reporting changes you need to be aware of. Starting from August 2023, businesses seeking R&D tax relief will need to complete an additional information form to support their claim.
Understanding the additional information form
Before you submit your company's Corporation Tax Return, you must send an additional information form to HMRC via their dedicated online portal to support all your claims for Research and Development (R&D) tax relief or expenditure credit. Failure to do so will result in HMRC considering your R&D claim to be invalid, deleting the tax relief from your Company Tax Return. Therefore, it is crucial to provide the necessary evidence to support your claim.
What information do I need to provide?
A name of the individual responsible for the R&D claim
Identify the person within your business who is responsible for the R&D claim. This could be a representative of the company or an agent acting on behalf of the company.
Number of Projects Claimed
Indicate the number of projects you are claiming for:
- 1 to 3 projects: Describe all the projects covering 100% of the qualifying expenditure.
- 4 to 10 projects: Describe the projects that account for at least 50% of the total expenditure, with a minimum of 3 projects described.
- 11 to 100 (or more) projects: Describe the projects that account for at least 50% of the total expenditure, with a minimum of 3 projects described. If the qualifying expenditure is spread across multiple smaller projects, focus on the 10 largest projects.
To allow HMRC to confirm projects where the 50% total expenditure rule applies, you will have to demonstrate how costs are split between the projects, providing category totals where details are being supplied (as well as for the total).
Descriptions of projects:
You will need to provide descriptions for 3 to 10 of the projects under 5 key headings.
Main Field of Science or Technology
Briefly describe the field of science or technology related to the project. Note that science involves the systematic study of the physical and material universe, while technology is the practical application of scientific principles or knowledge.
Baseline Level of Science or Technology
Explain the level of knowledge or capability that existed at the start of the project and the advancements the company intended to achieve and explain the steps taken to confirm the baseline. For example, if the goal was to improve an existing material or device, describe its existing features and capabilities.
Advancement in Scientific or Technical Knowledge
Describe the advance in knowledge or capability that the project aimed to achieve, comparing it to the baseline level of science or technology. Highlight how this advance contributes to the field as opposed to just your company.
Scientific or Technological Uncertainties
Identify the specific scientific or technological uncertainties faced during the project. Explain why these uncertainties were challenging to overcome and what factors meant that no immediately obvious solution was available.
Provide detailed information about the R&D activities carried out to overcome scientific or technological uncertainties. Describe the methods used, potential challenges faced, and whether the uncertainties were successfully resolved.
Claiming R&D tax relief has become more complex with the introduction of the additional information form, in addition, HMRC have also ramped up its level of compliance checks and is challenging more claims.
To ensure a successful claim, it is essential to provide comprehensive and accurate details about your projects and their impact on scientific or technological advancements. Don't miss the opportunity to benefit from R&D tax relief. For more information or assistance get in touch with us. Our team is ready to help you navigate the process and maximise your claim.