As of August 8th, there are significant changes to the process of claiming R&D tax credits.
From this date, new criteria will apply to all R&D claims, regardless of the tax year they are for. Failure to meet these requirements will result in the rejection of incomplete submissions by HMRC.
Notable adjustments will be introduced in the following areas:
- Project Reporting
- Reporting Requirements for Qualifying Expenditure
- Company and Contact Details
At IFTC, we are R&D tax credit experts who specialise in R&D tax credits. We have the expert knowledge to help and support you through these changes with advice and guidance, or by managing part or all of the process.
Upcoming changes to project reporting for R&D tax credits
Businesses with 1-3 projects all projects must be described. For those with 4 to 10 projects, at least 3 projects must be described, accounting for at least 50% of total expenditure. For those with 11 or more projects, up to 10 projects accounting for at least 50% of total expenditure should be described.
To submit an R&D claim, there are six specific detailed technical questions that must be addressed for each project:
- Main field of science or technology.
- Baseline level of science or technology the company aimed to achieve.
- Advancement in scientific or technological knowledge the company sought to accomplish.
- Scientific or technological uncertainties encountered by the company.
- Strategies employed by the project to overcome these uncertainties.
- Type and amount of tax relief being claimed.
What does this mean for you?
This enhanced level of detailed reporting may pose a challenge for accountants lacking expertise or technical knowledge in the R&D domain. Accurately capturing and presenting the required information could be difficult, potentially resulting in incomplete or inaccurate submissions.
The transition to the new online HMRC portal requires accountants to adapt to the technological aspect, as there is only a 30-day timeframe for completion once the submission process is initiated.
Reporting requirements for ‘Qualifying Expenditure’
The reporting requirements for “Qualifying expenditure” require a detailed breakdown of expenses by project, along with the identification of qualifying indirect activity.
It is crucial to note the following types of “Qualifying expenditure”:
- Cloud computing costs, including storage, applicable for accounting periods starting on or after April 1, 2023.
- Data license costs, relevant for accounting periods commencing on or after April 1, 2023.
- Externally provided workers.
- Payments made to participants involved in a clinical trial.
- Software expenses.
- Staff-related costs.
- Subcontractor expenses.
It is important to remember that HMRC will reject incomplete submissions. And, these changes are not the only modifications to be aware of.
So, what does this mean for you?
Reporting has become significantly more complex. Accountants who are unfamiliar with R&D projects may face challenges in accurately breaking down expenditure by project and categorising it appropriately. You may need to rely more on the client for accurate information, which can introduce risks. It is crucial to assess their record-keeping capabilities and determine if they expect you to handle the reporting. This increased complexity will likely require more time and incur additional costs for you and/or your client.
New requirements for company and contact details
The new requirements for company and contact details will be applicable to ALL R&D claims submitted starting from August 8th of this year.
Company Details:
- Unique Taxpayer Reference (UTR): The UTR provided must match the UTR used in the Company Tax Return.
- Employer PAYE reference number.
- VAT registration number.
- Business type, which includes the current SIC (Standard Industrial Classification) code.
- Software expenses.
- Staff-related costs.
- Subcontractor expenses.
Contact Details:
- The primary senior internal R&D contact within the company, who holds responsibility for the R&D claim (e.g., a company director).
- Any agent involved in the R&D claim.
- The accounting period’s start and end dates must be provided.
So, what does this mean for you?
While these details may not be overly complex, they hold significance. It is crucial to clarify who will serve as the client’s Senior R&D contact. Are they fully aware of the content of the claim? They may require a comprehensive briefing before agreeing to be the company contact for HMRC. Assuming you have provided support to the client with the claim, you would act as the agent, which brings the Professional Conduct in Relation to Taxation (PCRT) requirements into play.
How can we help you?
IF R&D Tax Credits Ltd is a leading firm of R&D tax credit experts. Our focus is on helping clients across Ireland maximise the benefits from these very worthwhile tax incentives and we have the expertise to submit your R&D claim correctly.
Contact us here for further information.
