5 Key R&D Tax Relief Changes That You Need To Know
The SME R&D tax relief scheme is set to change from the 1st of April 2023. The key changes include:
- Data & Cloud Computing: The expansion of qualifying expenditure to include data and cloud computing costs associated with R&D activity. Currently, only the cost of software licenses is eligible for the relief.
- UK vs Overseas: Reliefs to be refocused towards innovation undertaken in the UK. A new condition will be added which dictates that the expenditure on subcontracted R&D and externally provided workers (EPWs) must be incurred within the UK. If R&D activity is performed overseas, additional relief will be denied from the 1st of April 2023.
- Corporation Tax Returns Going Digital: The new legislation will be introduced with effect from April 2023 to require that all Corporation Tax returns that contain an R&D claim, including amended returns, must be submitted digitally through HMRC’s tax return portal.
- Accountability: Claims will need to include details of any agent who has advised the company on compiling the claim.
- Notification in Advance Of Claim Intent Required: From the 1st of April 2023, companies will need to inform HMRC that they plan to make an R&D claim in advance. They will need to do this, using a digital service within 6 months of the end of the period to which the claim relates. Thankfully, the announcement contained a key exemption to the pre-notification requirement. Companies that have claimed in one of the preceding three accounting periods will not need to pre-notify. This is welcome news for all companies which have claimed R&D tax relief in a recent accounting period.
Whilst we support many of the measures introduced by HMRC to combat fraud and error in the system, we’re viewing the pre-notification rules as questionable. Many view the change as grossly unfair.
What does this mean for potential claimant companies?
The pre-notification rules mean that companies who intend to make claims for a prior accounting period must take action before the 1st of April 2023. After this date, previous accounting periods will fall out of the window for making a claim. It’s therefore imperative that companies who are planning to make a claim take immediate action. At Raffingers, we can advise on the various timing issues which will be presented as a result of the forthcoming changes.
The message is clear - if you’re thinking of making a claim and haven’t made a claim in the last 3 years, act now. Contact us by clicking here.