Recent HMRC figures show the number of claims for Research & Development (R&D) tax credits fell 21% in the 2022/23 tax year to 65,690, down from 83,240 in the 2021/22 tax year.
The Government continues to change how companies claim R&D tax credits. Some companies now have to submit an advanced notification form before making a claim.
It is no wonder that the number of claims is decreasing, as SMEs increasingly see entry barriers and can often feel overwhelmed by the rules around R&D tax relief.
Why have R&D tax relief rules changed?
R&D tax credits offer valuable relief to businesses investing in innovation. However, in recent years, HMRC has made the rules on claiming R&D relief more stringent in an attempt to identify and stop fraudulent claims.
This advanced claim notification aims to restrict R&D claims only to companies doing qualifying R&D ‘on purpose’.
What is advanced notification?
Some companies claiming Research & Development (R&D) tax relief must now submit ‘advanced notification’ details to HMRC before making an R&D claim.
What do the new R&D tax credit rules mean for business owners?
The requirements for advanced notification make it much harder for companies to backdate claims. The advanced notification rules, timing, and who may or may not be exempt from needing to apply can also be very complex for businesses to understand.
In enquiries, HMRC expect claimants to demonstrate that R&D projects were planned, documented, and led by competent professionals who knew the work was to advance science or technology in their field of expertise.
Understanding R&D advanced notification rules
For businesses claiming R&D tax relief or expenditure credit for accounting periods beginning on or after 1 April 2023, a claim notification form must be submitted to HMRC if:
- The business is claiming R&D for the first time,
- The company has not submitted an R&D claim in the three years prior to the pre-notification deadline.
Submitting a R&D claim notification
If you are a first time R&D tax relief claimant
For companies claiming for the first time, you must inform HMRC of their intention to make an R&D claim using HMRC’s digital service within 6 months of the end of the accounting period, referred to as the claim notification period.
Your claim notification period:
- Starts on the first day of the ‘period of account’ — this is the first date of your notification period
- Ends 6 months after the end of the ‘period of account’ — this is the last date of your claim notification period
If you claim for a ‘period of account’ that’s 12 months or less, your ‘accounting period’ willusually cover the same time as your ‘period of account’.
If you claim for a ‘period of account’ over 12 months, it will include 2 or more ‘accounting periods’. The claim notification period is the same for all accounting periods.
If you’ve claimed R&D tax relief in the last 3 years
If you’ve claimed R&D tax relief within 3 years of the last date of your claim notification period, you do not need to send a claim notification form unless any of the following exceptions apply:
- HMRC rejected your R&D tax relief claim by removing it from your Company Tax Return
- You claimed R&D tax relief for an accounting period beginning before 1 April 2023 by amending your tax return and the amendment was received on or after 1 April 2023
If you made a claim more than 3 years before the last date of your claim notification period or if any of the exceptions apply, you’ll need to either:
Submit the claim notification form by the ‘last date of the claim notification period’
Send the R&D tax relief claim on your Company Tax Return or as an amendment to the return, so that it’s received by the ‘last date of the claim notification period’.
Failure to submit the claim notification form will render the claim invalid.
What information is required for the advanced notification form?
To complete the Advance Notification form, companies will need to provide details about their company, including:
- Company name, address & UTR.
- The main senior internal R&D contact in the company
- Contact details of agents who provided advice.
- Accounting period start and end date for which you are claiming.
- A summary of planned activities, such as a project description, explaining how it seeks advances in scientific or technological uncertainties and qualifying expenditures.
You won’t be required to include evidence at this point, but you’ll be asked to give additional information before you claim R&D tax relief on your return.
Who can submit the notification and how?
Representative or agent can submit online using Government Gateway user ID or email address.
Submitting the Additional Information Form
Claimants for R&D tax relief also need to remember that the Additional Information Form (AIF) is required for all R&D Tax Relief claims. The Advanced Notification Form does not replace the Additional Information Form. The Additional Information Form is required for all claims, whereas the Advanced Notification form is only needed in the circumstances detailed above.
Some companies may therefore need to file both forms prior to filing an R&D Tax Relief claim.
How Edwards Chartered Accountants can support with the new R&D tax credit rules
Advanced Notification rules are now essential to some companies’ R&D tax relief claims process. For many SMEs, this new process has meant they have missed out on this valuable tax relief because advanced notification wasn’t given in time.
Edwards Chartered Accountants taxation specialists can provide valuable guidance and support to help companies navigate the entire R&D process. If you are considering making an R&D claim and may be required to provide advance notification, contact Edwards Accountants today.
