R&D Tax Relief Changes from 1 August 2023

27/05/2023 - 13 minutes read
Table of Contents SHOW

R&D Tax Relief Changes from 1 Aug 2023 stipulate that you must complete and submit an additional information form to HMRC to support all your claims for Research and Development (R&D) tax relief or expenditure credit.

As per the R&D Tax Relief Changes from 1 Aug 2023, you will need to send HMRC an additional information form before you submit your company’s Corporation Tax Return.

R&D Tax Relief Changes from 1 August 2023

If you’ve not notified HMRC when you’re required to, and you’ve already submitted your company’s Corporation Tax Return, HMRC will write to you to confirm that they have removed your claim for R&D tax relief from your Company Tax Return.

We discuss the R&D Tax Relief changes for accounting periods beginning on or after 1 April 2023 in a separate article here.

R&D Tax Relief Changes from 1 Aug 2023 – What information will you need?

Company details

  • – Unique Taxpayer Reference (UTR), this must match the one shown in your Company Tax Return
  • – employer PAYE reference number
  • – VAT registration number
  • business type, for example, your current SIC (Standard Industrial Classification) code

Contact details

The contact details of:

  • – the main senior internal R&D contact in the company who is responsible for the R&D claim, for example, a company director
  • – any agent involved in the R&D claim

Accounting period start and end date

The accounting period start and end date for which you’re claiming the tax relief. This must match the one shown in your Company Tax Return.

R&D Tax Relief changes from 1 Aug 2023

R&D Tax Relief changes from 1 Aug 2023 stipulate that you must complete and submit an additional information form to HMRC to support all your claims.

Qualifying expenditure details

Include details of the qualifying expenditure.

If you meet the conditions, you can claim for either or both:

  • – tax relief as a small and medium-sized enterprise (SME)
  • – expenditure credit as a large company or SME

If you’re claiming for SME tax relief, you can claim for:

  • – cloud computing costs, including storage, for accounting periods beginning on or after 1 April 2023
  • – consumable items, for example, materials or utilities
  • – data licence costs, for accounting periods beginning on or after 1 April 2023
  • – externally provided workers
  • – payments to participants of a clinical trial
  • – software
  • – staff
  • – subcontractor costs

If you’re claiming for expenditure credit, you may be able to claim for:

  • – cloud computing costs, including storage, for accounting periods beginning on or after 1 April 2023
  • – consumable items, for example, materials or utilities
  • – contributions to independent R&D costs
  • – data licence costs, for accounting periods beginning on or after 1 April 2023
  • – externally provided workers
  • – payments to participants of a clinical trial
  • – software
  • – staff
  • – subcontractor costs

Qualifying indirect activities

Include the amount of qualifying expenditure for each project of qualifying indirect activities, that do not directly lead to resolving the uncertainty.

This may include:

  • – creating information services for R&D support such as preparing a report of R&D findings
  • – direct supporting activities such as maintenance, security, administration and clerical activities and finance and personnel activities, for the share that relates to R&D
  • – ancillary activities needed to begin R&D, for example, taking on and paying staff, leasing laboratories and maintaining R&D equipment, including computers used for R&D purposes
  • – training required to directly support the R&D project
  • – research by students and researchers carried out at universities
  • – research including data collection to make new scientific or technological testing, surveys or sampling methods, where this research is not R&D in its own right
  • – feasibility studies to inform the strategic direction of a specific R&D activity

This cannot include any costs related to data licensing or cloud computing.

R&D Tax Relief Changes from 1 Aug 2023 – Project details

The number of all the projects that you’re claiming for in the accounting period and their details.

If you’re claiming:

  • – for 1 to 3 projects, you need to describe all the projects you’re claiming for that cover 100% of the qualifying expenditure
  • – for 4 to 10 projects, you need to describe those projects that account for at least 50% of the total expenditure, with a minimum of 3 projects described
  • – for 11 to 100 (or more) projects, you need to describe those projects that account for at least 50% of the total expenditure, with a minimum of 3 projects described — if the qualifying expenditure is split across multiple smaller projects, describe the 10 largest

Give a description for each of the projects

1. What is the main field of science or technology

Provide a brief description of the field of science or technology that the project relates to.

The following terminology will help you complete the description.

Science is the systematic study of the nature and behaviour of the physical and material universe. Work in the arts, humanities and social sciences, including economics, is not science for this purpose.

From 1 April 2023 mathematical advances in themselves are treated as science for these purposes, whether or not they are advances in representing the nature and behaviour of the physical and material universe.

Technology is the practical application of scientific principles or knowledge.

2. What was the baseline level of science or technology that the company planned to advance

Describe the level of knowledge or capability that existed at the time the project started and which the company intended to advance, for example, if the intention was to:

  • – improve an existing material or device, what were its existing features and capabilities
  • – develop new knowledge in a particular area of science or technology, what was already known

3. What advance in that scientific or technological knowledge did the company aim to achieve

Provide a description of the advance using the baseline level of science or technology in the previous answer as a comparison.

The following information will help you complete the description.

An advance in knowledge or capability in science or technology may have physical consequences or maybe an increase in overall knowledge, but in either case, a competent professional working in that field would recognise it as a significant improvement.

The improvements may include:

  • – creating a process, material, device, product or service that increases knowledge or capability
  • – improving an existing process, material, device, product or service, for example, to save costs or reduce waste
  • – using science or technology to copy the effect of a current process, material, device, product or service in a new or improved way

4. The scientific or technological uncertainties that the company faced

You must include only scientific or technological uncertainties, for example, the company:

  • – does not know if it is possible to create or improve the product or process
  • – cannot readily deduce how to create or improve the product or process, for example, you tried to build a medical diagnostic tool combining non-invasive testing technology, artificial intelligence (AI) and portability, but you’re not sure about the method to do this

Your description of the uncertainties should explain:

  • – what is stopping you from achieving the advance in scientific or technological knowledge (a problem is not an uncertainty if it can be resolved in a discussion with peers)
  • – why is it a technological or scientific uncertainty for the industry, not just your company
  • – if a competent professional working in the field would be uncertain as to how to achieve the advance, and explain why

5. How did your project seek to overcome these uncertainties

Provide more details about the direct R&D activities that try to resolve the scientific or technological uncertainties, as well as qualifying indirect activities.

Describe the information in sufficient detail to tell us:

  • – how the R&D project was not straightforward
  • – the methods planned or used to overcome the uncertainty
  • – if the uncertainties were resolved, if yes how, and if no why not

Qualifying indirect activities may include:

  • – creating or adapting software, materials or equipment needed to resolve the uncertainty
  • – planning activities such as a detailed plan of how you will carry out the project
  • – designing, testing and analysing to resolve the scientific or technological uncertainty

Include the qualifying expenditure for each project for indirect activities that do not directly lead to resolving the uncertainty, a list of what may be included can be found in the section qualifying indirect activities.

6. Which tax relief you’re claiming and the amount

Tell us what you’re claiming for, for example, R&D tax relief, expenditure credit, or both, and what amount of the qualifying expenditure applies to each specific project.

R&D Tax Relief Changes from 1 Aug 2023 – Submit your form

You can submit the form if you’re:

  • – a representative of the company — you will need the Government Gateway user ID and password you used when you registered for Corporation Tax, if you do not have a user ID, you can create one the first time you sign in
  • – an agent — you will need the Government Gateway user ID and password you used when you registered for the agent services account, if you do not have a user ID, you can create one the first time you sign in

You will not be able to access the form once it’s been submitted, so save a copy before you do.

Start now

How can MCL Accountants help?

Contact MCL Accountants on 01702 593 029 if you would like further information about R&D Tax Relief Changes from 1 Aug 2023 or if you need any assistance with the preparation and submission of your business accounts or self-assessment tax returns to HMRC.