Talking Tax: July 2022
Author: Adam Spriggs, R&D Tax Director
Over the past month we have received the draft legislation for the finance bill that contains further detail on recently announced R&D tax changes, as well as confirming other changes.
These changes will take effect from April 2023 and include:
- All claims will need to be submitted electronically.
- Companies will have to inform HMRC within 6 months of their year end if they intend to make an R&D claim. Companies that have made an R&D claim in the previous 3 periods do not have to notify HMRC. This will mean that companies who haven’t previously claimed, will be unable to go back the usual 2 years under normal statutory rules.
- All claims must include who the agent is (if applicable) and be endorsed by a senior officer of the claimant company.
- Pure mathematics will be an eligible field of science and technology.
- Subcontracted costs will be limited to those undertaken within the UK, unless it meets certain conditions around the activity having to be undertaken overseas for geography, environmental or population reasons.
The biggest relief, which was announced at the R&D Communication Forum the previous week, was that the notification to HMRC that a company intended to make a claim only took the form of within 6 months of year end and wouldn’t impact those already claiming. The concern was that the scheme could have followed countries like Australia and South Africa whereby companies have to tell the governments before the accounting period begins what the R&D will be, like the Advance Assurance scheme, which would naturally prevent a lot of companies from claiming who don’t know that they will be undertaking R&D or specifically what it would be before the accounting period begins.
5-0 in enquiries
Over the past year, Zeal have helped 4 companies who’s claims had been prepared elsewhere settle (with two more ongoing) their enquiries. In each of them, HMRC had initially claimed that they had undertaken no R&D whatsoever and after requesting a call with HMRC all of the R&D was approved with help from our team. This month Zeal defended one of its own clients, whereby HMRC felt that the company didn’t even perform activities within a qualifying field of science or technology. Following the call, HMRC conceded and in turn agreed that everything this company undertook would be a qualifying activity.
Whilst there is concern within the industry re the quality of claims submitted, which has prompted the crackdown on fraudulent claims, the other side to this is that HMRC do get things wrong. The important point to consider is always how defendable is your claim and how is the information being presented. Often claims are questioned because they’re not clearly providing HMRC with the information they need.
For help with HMRC enquiries on R&D Tax Credits claim, contact Adam Spriggs on firstname.lastname@example.org