Now, fast forward to today, where the government has grown more cautious about fraud and error in the R&D tax regimes. As a result, they have
- made it mandatory to submit digital amendments to Corporation Tax Returns for R&D claims,
- introduced prenotification rules,
- established an “Additional Information form” (AIF).
This latter measure was introduced on the 8th August 2023, and claims without an AIF are rejected outright. It’s focused on determining whether the BIS guidelines have been correctly applied to project activities.
New requirements for supporting evidence for R&D claims
So, what evidence is now required to support a claim?
HMRC is now clear about the number of qualifying projects you need to report. It depends on the number of qualifying projects included in the claim.
- For companies claiming 1-3 projects only, all projects need to be presented.
- For companies claiming 4-10 projects, at least 3 projects will need to be presented but further projects need to be presented until 50% of the claim costs are supported.
- For companies claiming over 11 projects, a company will need to describe those projects that account for 50% of the claim costs, with a minimum of 3 projects described up to a maximum of the 10 with the most qualifying expenditure. The 50% expenditure rule needs to be met for both SME and RDEC Claims, so some companies may find themselves having to describe additional projects to meet these requirements.
You’ll also need to provide details of the senior contact for R&D at the claimant company, and any agents involved in the claim.
The structure of the Additional Information forms also makes it harder for companies to describe product development as qualifying R&D. You’ll need to make sure the evidence is focused on those specific advances in science or technology that were required within the New Product Development (NPD). It might sound onerous, but this is the information HMRC will use to decide if the claim is valid.
How is this changing the landscape of R&D claims?
HMRC have been developing better tools to scrutinise claims more efficiently. They are trying to ensure that essential evidence is provided and examined. This means it’s crucial to complete the new forms accurately and provide enough information for HMRC to make informed decisions regarding your adherence to the BIS rules.
Making a successful claim for R&D Tax Relief now requires much more careful preparation. The baseline knowledge and technological uncertainties must be crystal clear, and the specific advances in science or technology demanded by your commercial project must be presented relative to the baseline.
While all this may seem like a heap of extra work, rest assured that these changes shouldn’t prevent genuinely qualifying R&D companies from claiming.
What resources are there to help?
If you want to be sure you’re submitting rigorous, well-prepared claims, it’s worth developing your own internal quality assurance process for claims. You can kick this off by downloading our free R&D Red Flag Checklist, which will help you spot mistakes and risks hiding within your clients’ claims.
