Additional Information Requirements for R&D Tax Claims pushed back by one week

HMRC has announced that the new additional information form that needs to be submitted in support of R&D tax claims has been pushed back by one week, from 1^st August 2023 to 8^th August 2023, providing a further 7 days for companies to prepare.

Following a busy week of R&D tax news, the announcement serves as a reminder to companies that R&D claims submitted from 8^th August need to include mandatory additional information or face being rejected by HMRC.

What are the new additional information requirements?

One of the most significant new requirements relates to the number of R&D projects being claimed by a company. If you’re claiming:

• for 1 to 3 projects, you need to describe all the projects you’re claiming for that cover 100% of the qualifying expenditure

• for 4 to 10 projects, you need to describe those projects that account for at least 50% of the total expenditure, with a minimum of 3 projects described

• for 11 to 100 (or more) projects, you need to 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, describe the 10 with the most qualifying expenditure.

This means that the R&D activities of each project need to be sufficiently captured and presented to HMRC in an effective way. Other new requirements include:

• Providing the contact details of: the main senior internal R&D contact in the company who is responsible for the R&D claim, for example a company director, as well as providing the contact details of any agent involved in the R&D claim

• Providing details of the qualifying expenditure for each project (both direct activities and qualifying indirect activities)

• Providing details of the company UTR number, VAT registration number, employer PAYE reference number, and company SIC code.

How is the new additional information submitted to HMRC?

The additional information form can be submitted if you are:

• a representative of the company — you will need the Government Gateway user ID and password you used when you registered for Corporation Tax, if you do not have a user ID, you can create one the first time you sign in

• an agent acting on behalf of the company — you will need the Government Gateway user ID and password you used when you registered for the agent services account, if you do not have a user ID, you can create one the first time you sign in.

Why have the additional information requirements been introduced?

In recent years, HMRC has progressively developed a compliance-driven approach toward R&D tax relief schemes to prevent abuse, error and fraud. It is hoped that the Additional Information requirements will discourage spurious R&D claims from being submitted as well as helping HMRC to identify companies and/or agents involved in attempting to make illegitimate R&D claims.

Earlier this week, HMRC published new findings that suggested unprecedented levels of non-compliance within R&D claims were prevalent in the 2020-2021 period. The findings, predominantly based on a sample of 500 claims investigated by HMRC, suggested 25% of SME R&D Claims contained no qualifying R&D activity. The findings also suggested that lower-value R&D claims were more likely to be non-compliant and first-time claimants were more likely to have errors in their R&D claims.

Draft legislation on the proposed structure of the R&D Tax relief system was also published this week. In it, the potential merging of the SME & RDEC systems has been put forward as a mechanism that may help prevent non-compliance in R&D claims going forwards. Further detail on HMRC’s findings of non-compliance and draft legislation can be found within this Albert Goodman article Non-compliance in SME R&D claims and the proposed future of the SME R&D Tax Relief (albertgoodman.co.uk)

The ongoing changes to R&D tax relief have created an environment where companies may not be fully equipped with current information to properly prepare their R&D claims. From 8^th August 2023, it is vital that companies are aware of what is required so that they can submit their R&D claims with reassurance that their processes and level of information are appropriate.

We are pleased to continue to support companies with their R&D claims and if you would like to speak with one of our specialist advisers, please do get in touch.