R&D

Around 90,000 businesses will benefit from new changes to the tax credit system for research and development (R&D).

The new changes will mean businesses will have to apply for all reliefs online and will be required to pre-register claims regardless of the size of their business.

Companies seeking R&D expenditure credit (RDEC) and SME R&D relief, as well as those that have made a Patent Box election, will be affected as of 1 April 2023, when these changes come into effect.

Furthermore, all claims for R&D tax credits must be submitted digitally. This refers to either a tax deduction or a tax credit.

How can you let HMRC know?

If you want to file a claim, you will need to notify HMRC in advance. This must be done within six months after the end of the time period covered by the claim, and it must be done digitally.

For people claiming in one of the previous three periods, pre-informing is not required.

The claim deadline will be extended from one year to two years from the end of the accounting period to which it relates, rather than the current one year from the date of legislative filing.

This aims to prevent companies from being granted additional time to submit a claim if they do not get a notice to file because they either fail to register or notify HMRC that they are inactive.

How will this affect SMEs?

SMEs that are in the middle of their development will be protected by an extra form of protection, which will effectively remove them from the SME criterion.

Businesses moving from the SME scheme to RDEC will be protected, which means that if one SME within a group exceeds the SME size restrictions, all companies within the group will maintain SME status for one more year.

Now, although the company keeps its status, others in the same group lose it right away.

Spending on external staff hired by businesses to do R&D will only be permitted to the extent that their wages are subject to PAYE or are related to R&D activities outside the UK covered under the new section 1138A.

 

If you need support with R&D, get in touch with our experts at enquiries@aitaccountants.co.uk