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Changes to the R&D Tax Relief Scheme

A reminder from our partners at Shorts of the important changes introduced in April and those that take effect from August.

Last year we shared some useful information from Shorts about updates to the Research & Development (R&D) Tax Relief Scheme, relating to what and how you claim. From 1 April 2023, qualifying R&D expenditure has been extended, however the rates of R&D relief have been reduced. From 1 August, there are new reporting requirements in order for your claim to be valid. Shannon Wilson, Manager of the Shorts Radius service, has given us some further details on these three areas to help you navigate your R&D Tax Relief Claim.

Changes to R&D relief expenditure and rates

Data licensing and cloud computing costs are now included as qualifying R&D expenditure.

Reductions to the rates of R&D relief came into effect from 1 April. The enhanced R&D relief has been reduced from 130% to 86% and the tax credit for loss-making companies is now 10%, down from 14.5%. However, if you are an R&D intensive company (defined as having 40% or more total company expenditure on R&D), you can still claim 14.5%.

‘Additional information’ now needed

With these changes come further reporting requirements. For an R&D claim to be valid, a company will need to submit an ‘additional information’ form digitally to HMRC. This should be submitted as a separate document to the Corporation Tax return and accounts, and any R&D report that you have prepared. This applies to any claim submitted on or after 1 August 2023. It is important to be prepared now by ensuring adequate records for each R&D project undertaken.

It’s also worth bearing in mind that the HMRC is trying to crack down on error and fraud in the scheme, and as part of this, they are selecting R&D claims at random for enquiry. If your claim is picked for an enquiry, you may be asked for ‘contemporaneous R&D project records’ with costs needing to be allocated to each project. This further demonstrates the need for good and accurate record-keeping of your R&D expenditure, per project.

More help

For more information on all of the above points, Shorts has written a practical guide designed to help you remain compliant with the HMRC in the forthcoming claim period. You can access this guide here.

You can also benefit from a free review of your R&D Tax Relief Claim from experts in the Shorts Radius R&D team. Find out more about this here.