From 1 April 2023, R&D tax relief is changing, following announcements in the 2021 Autumn Budget. But what do these changes mean for your business?
The Research and Development Communication Forum (RDCF) recently met in July 2022 to discuss the upcoming changes, the most significant being:
- Restrictions for businesses conducting R&D activities overseas
- Inclusion of cloud computing and data costs in qualifying R&D expenditure
- Increased focus on compliance and tackling abuse of the tax credit scheme
- Requirement of a senior company officer to sign off R&D claims
Perhaps the most notable discussion point at the RDCF meeting was the requirement for companies to inform HMRC of their intention to make an R&D claim ‘within six months of the end of the period to which the claim relates’. If you are unsure whether you will make a claim, it’s worth submitting an advanced notification to HMRC, just in case, as there won’t be a penalty if the claim doesn’t go ahead.
The requirement to provide prior notice of an R&D claim will only apply to new claimants, or organisations who have not made an R&D claim in the previous three years.
According to HMRC guidance, there doesn’t seem to be any flexibility on the six-month notification period, therefore advanced planning and proactiveness will be required in identifying R&D projects as they arise and not as part of an organisation’s Corporate Tax Return preparation, which could be up to 12 months post accounting year-end.
We would recommend speaking to your accountant if your organisation undertakes research and development and has not yet made an R&D tax relief claim. Your adviser will work with you to agree a process of ongoing in-year project review, as the six-month advanced notification could mean many eligible organisations are unable to make an R&D claim due to engaging accountants who are not experts in this specialist area of tax, and therefore opportunities to identify activities taking place in the year may be missed.
If you would like to discuss the changes to the R&D tax relief scheme which are due to take effect from 1 April 2023, get in touch with PM+M corporate tax director, Claire Astley, by clicking the button below.