R&D tax relief changes to tackle fraud
Since its introduction over 20 years ago, Research and Development (R&D) tax relief has helped to stimulate economic growth and boost employment by encouraging companies in the UK to pursue innovative investments.
However, there has been some concern that the level of exaggerated or fraudulent R&D relief claims is increasing. It’s believed that almost 20% of all claims are fraudulent, with non-compliance being a particular issue for small-value claims of £10,000 or less.
To counter dishonest applications, HMRC has introduced changes in the way companies must apply for R&D tax relief. To submit a claim, companies must complete another form in advance and provide extra information.
Additional information required for R&D forms
Any R&D claims submitted to HMRC for accounting periods starting on or after 1st April 2023 must be preceded by a claim notification. This additional form requires more information when reporting projects, qualifying expenditure, and company details.
Companies must submit the supplementary form before filing their Corporation Tax return, as HMRC will simply remove the R&D relief claim from their tax return if the company files it without providing the additional required information first.
This must be submitted through an online portal – HMRC accepts digital submissions only, allowing the tax agency to process claims and check their validity much faster.
Claimants must supply much more expansive and detailed information than before to support their R&D tax relief submission. This includes VAT registration, Unique Taxpayer Reference (UTR), and PAYE reference numbers, the contact details of internal personnel involved, and technical breakdowns of qualifying R&D projects.
The latter requires in-depth reports of all direct and indirect R&D activities within the fiscal year, including answering specific questions about the scientific or technological field invested in, the baseline of planned advancements, and cost breakdowns.
Increasing the level of accountability expected from companies applying for R&D tax relief should help to prevent misuse of the scheme and make the process more streamlined, but it could take some adjusting for companies and their accountants.
Get help with submitting R&D tax relief forms
While a considerable amount of extra effort is needed to supply all the additional information required by HMRC, this enhanced measure should help to sift out fraudulent applicants, or those who haven’t provided enough detail about their R&D projects.
Complying with the more complex new rules could still be challenging for small-to-medium enterprises (SMEs) whose financial representatives may lack technical expertise about R&D. Those who aren’t prepared for the changes risk submitting inaccurate or incomplete information that could compromise the success of their claim.
Therefore, it’s a good idea for companies who plan to claim R&D tax relief to begin preparing as soon as possible. Keeping robust records and starting the process well in advance should ensure that the required information is readily available, and there isn’t a rush to complete the time-consuming form that could result in costly mistakes.
An easier way to ensure that your company is fully compliant with the latest requirements from HMRC and can secure the highest level of tax relief possible is to speak to a tax specialist. Here at gbac, our tax consultants can use our years of expertise in communicating with HMRC to make sure your R&D tax relief claim complies.