Changes to R&D Tax Relief 2023

Overview – R&D Tax Relief 2023

Tax reliefs are available to UK companies that innovate, which can either generate cash repayments or reduce their tax liabilities. This is provided that their innovation qualifies as Research & Development (R&D) expenditure.

HMRC have been tackling and are continuing to tackle fraudulent claims. Leading to delays for many innocent claims and consequently, introducing changes.

Tackling abuse of R&D tax reliefs

The main changes for R&D tax relief 2023 are:

• Companies will need to inform HMRC, in advance, confirming that they plan to make a R&D claim. They will need to do this, using a digital service, within 6 months of the end of the period to which the claim relates. Companies that have claimed in one of the preceding three periods will not need to pre-notify.
• Amending the time limit for making a claim to two years from the end of the period of account to which they relate rather than 12 months from the statutory filing date
• A non TOGC can make a claim for R&D – i.e. where they lose TOGC status because there’s been a transfer of trade
• Claims must be digital and not paper claims
• These digital claims will have to break the costs down across qualifying categories and provide a brief description of the R&D. Each claim will needs endorsement by a named senior officer of the company

Our thoughts and considerations

It is clear that HMRC are transitioning many of their operations to digital only. We have seen this with MTD for VAT. Implementing of digital processes for other taxes will be roll out over time.

An advance notification to HMRC will prompt HMRC that a claim is on the way. This will allow HMRC to have the necessary teams in place to ensure that claims are good and proper. Whilst also being well examined following the R&D submission. Notably, this requirement will need to be done within six months of the end of the accounting period to which the claim relates. Firms should be aware of this change as if a notification is not made to HMRC in time, an R&D claim may not be accepted.

This follows the second bullet above, meaning the time limit now changes from 12 months of the statutory filing date to two years from the end of the accounting period. Whilst, on the face of it this date is the same, it prevents companies from benefiting from R&D relief who do not receive a notice to file. This is because they have already failed to register or notify HMRC that they are dormant.

Complying with the new changes, including providing HMRC with thorough detail on costings and endorsing each claim by a senior company officer will be compulsory. Companies should prepare and seek advice in advice of making a notification to HMRC from a suitably qualified tax professional.

Should you require assistance in making a claim to HMRC, or help in understanding whether your companies activity is qualifying for R&D purposes, then please get in touch.