HM Revenue and Customs (HMRC) is revolutionising the Research and Development (R&D) tax relief process to bolster transparency, accuracy, and compliance. Starting August 8th, 2023, significant updates will simplify the application process and ensure businesses across the United Kingdom can access the R&D tax benefits they are entitled to receive.
The key enhancements to the R&D tax relief requirements include:
- Additional Information Form: Commencing August 1st, 2023, all companies seeking R&D tax relief or expenditure credit must complete and submit a supplementary information form to HMRC. This form aims to provide comprehensive details about the R&D projects and activities underlying the claim.
- Pre-submission Requirement: To maintain accuracy and accountability, companies must send the additional information form to HMRC before submitting their amended Corporation Tax Return (CT600). If an individual fails to meet this requirement, HMRC will remove the company’s R&D tax relief claims from their Tax Return.
- Expanded Information Requirement: Claimants must furnish more detailed information when filling out the form for additional information. This detail includes their VAT registration number, contact details of the primary senior internal R&D personnel (e.g., company director), and information about any agents involved in the R&D claim.
- Detailed Claim Preparation: To successfully claim R&D tax relief, HMRC now mandates a more comprehensive set of requirements. This mandate requires taxpayers to provide the total count of R&D projects during the fiscal year, a detailed breakdown of direct and indirect qualifying R&D activities, and submit a more in-depth technical report.
- Standardised Questions: HMRC has introduced a uniform set of questions that taxpayers must address for each R&D project narrative within the claim. This standardisation aims to improve consistency and accuracy in submissions.
HMRC have revamped the R&D tax relief process to focus on three key sectors: technical, financial, and company information. The process involves providing specific details such as the primary field of science or technology, the current level of science/technology, goals for advancement, challenges encountered, solutions for problems, claim schemes, and financial data. Additionally, applicants must fill out critical company information and indirect activities like project management for qualification.
These updates aim to strengthen compliance, combat misuse, and foster a streamlined R&D tax relief process for all stakeholders. Transparency concerning agents’ involvement in claims and senior-level oversight of R&D compliance within organisations will increase.
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