The UK government has been rewarding innovative projects to incentivise companies from every domain to invest in research and development. R&D tax credit claims are highly lucrative and generous and have been attracting companies from every sector engaged in research and development projects to make claims and receive cash credits or tax reductions.
Over the past few years, HMRC has intensified the scrutiny to deal with abuse of claims and to mitigate fraudulent claims; many new rules and regulations were added in the past. Recently, HMRC has announced some more chances and compliance checks to deal with increasing fraudulent claims. Every company that aims to claim R&D tax credits must follow these additional requirements and checks. Therefore, if you intend to claim R&D tax credits, the following amendments came into effect on August 8, 2023:
Changes in the Eligible Costs & Activities
• Cloud Computing & Data Expenditure
Along with the new limitations and guidelines, HMRC has expanded the list of eligible expenses by including cloud computing and data charges.
• Pure Mathematics
As per newly announced changes in the R&D tax credits claim, you will be able to claim for the research and development made in pure mathematics. Previously, pure mathematics wasn’t considered an eligible project, but from now onwards, claimants can add projects involving pure mathematics to their claims.
Changes in the Claim Process
• Pre-Notification
According to the latest procedural changes announced by HMRC, from 8th August 2023, every claimant must notify HMRC about their intent within six months from the end of the accounting period. Now, you need to consider the project’s eligibility within that period and inform HMRC before the deadline; otherwise, your R&D tax credits for that accounting period will be rejected immediately.
• Senior Officer Endorsement
Moreover, now every R&D tax credits claim needs to be signed off by the claimant company’s senior officer. This additional requirement is mandatory, so every claimant company ensures correct information is provided in the claim before submission. For organisations with complex structures, it is crucial to carefully select a senior who has adequate knowledge of the R&D project to certify the R&D claim.
• Disclosure of R&D Claim Agent
With the increase in compliance, from August 2023, every claimant must also disclose the name of an R&D agent or consultant who helped them prepare and file their R&D claim.
• Additional Information Form
If you plan to claim R&D tax credits this year, then you must submit the additional information form before filing the company’s corporation tax return. This is mandatory for every claimant, and without submission of this form, HMRC won’t entertain your R&D claim. The additional information form requires you to provide the company’s details, such as contact information, unique taxpayer reference, VAT registration number, accounting period’s starting and ending dates, and the details of qualifying projects and expenditures.
• HMRC’s Right to Reject Claims
According to the new rules, HMRC now has the authority to decline any claim that it determines to be incorrect or incomplete on the basis of reasonable grounds. This means that if a company submits an R&D claim that does not comply with the rules, the claim will be denied without any additional scrutiny.
HMRC has made the above-mentioned modifications to guarantee the accuracy and compliance of the R&D tax credits claim. These policies also seek to protect R&D claims from exploitation and reduce erroneous and fraudulent claims. However, this raises the burden on the businesses to adhere to the new regulations and strategically plan their claims, supplying information about each project and eligible expenses.
In light of these newly introduced changes in the eligibility and process, it is vital for the companies to carefully understand the new requirements and plan ahead to save their R&D tax credit claims from loss or rejection. Start by focusing more on the data collection and documenting everything you need for the claim.
For more information, contact our team of R&D tax specialists, who can help you create proactive strategies and plan your next claim accordingly to save you from any kind of trouble. At Square Finance, we are a team of R&D claim specialists who can help you prepare your claim using our proactive approach to prepare your company to deal with the updated regulations and navigate through the complexities around R&D claims. Regardless of size and domain, we help every individual and company tailor robust claims, fully compliant with the regulations so you can claim without risk of rejection. And in case an enquiry arises, our team can also adeptly handle enquiries on your behalf and protect your claims. We have years of track record of successful claims, so for any query or concern, feel free to contact our R&D tax consultants, and we’ll help you find the solution you need.