16/11/2023

Newest Tax

Changes to R&D Tax Claims

As of 8th August 2023, there has been a significant change in the process of claiming Research & Development (R&D) tax relief in the UK. Companies or their agents are now required to submit a compulsory online form. This form, known as AIF (Additional Information Form), needs to be submitted to HMRC before filing their corporation tax return.

Failure to comply with this new requirement has considerable consequences and HMRC will automatically reject the claim which can be a significant setback for businesses seeking financial relief through R&D tax incentives. In the short period since the changes have been introduced, HMRC has stated that over 50% of companies face invalid R&D claims due to non-compliance.

Understanding the AIF Form

The AIF form goes beyond the standard information, such as the Unique Taxpayer Reference (UTR) and accounting period. It demands a detailed breakdown of the following:

  • Qualifying expenditure and indirect activities
  • The number of projects claimed for

Descriptions for 3-10 of the projects under 5 key headers:

  • Main field of science or technology
  • Baseline level of science or technology
  • Advancement in scientific or technical knowledge
  • Scientific or technical uncertainties
  • Overcoming uncertainties

In addition, a named senior officer of the claimant company will have to sign the form, and the form must include the name of the agent who has advised the company on compiling the claim.

Researching changes to Research and Development (R&D) tax and completing the Additional Information Form (AIF)

Reasons for Non-Compliance

Several reasons are contributing to the high level of non-compliance with the new AIF requirement:

  • Lack of Awareness: Many businesses are also not aware of the need to submit the AIF form. This has led to inadvertent non-compliance.
  • Changing Deadlines: There has been confusion over the starting date for submitting the AIF form, initially set for August 1st, 2023, and later moved to August 8th.
  • Shifting Eligibility: Originally, they required the AIF for accounting periods commencing on or after April 1st, 2023, but they changed it to any accounting period with a claim made on or after August 8th, 2023.

Concerns Raised by the Chartered Institute of Taxation (CIOT)

Given the mass of R&D claims that have been automatically rejected, The CIOT has expressed concern over HMRC’s handling of recent R&D claims. They have outlined several issues, including:

  • Unqualified Staff: The CIOT alleges that HMRC has brought in unqualified staff to assess R&D claims. This potentially leads to incorrect decisions.
  • Ignoring Responses: Critics claim that HMRC does not thoroughly review the responses on the AIF form before reaching a negative decision. Subsequently, this could lead to the dismissal of valid claims.
  • Lack of Communication: HMRC’s reluctance to engage in one-on-one meetings with agents or the client’s technical team has been a point of contention.
  • Threats and Penalties: Companies that have withdrawn their R&D claims due to difficulties in the process, have faced threats of penalties and interest from HMRC.

Impact on Innovation

The CIOT is concerned that HMRC’s approach to R&D claims may discourage companies from pursuing innovation. This could have negative consequences for the UK economy because businesses may reduce their investment in research and development activities.

Thus, the changes in the R&D tax relief claim process have created challenges for businesses and their agents. Non-compliance can lead to invalidated claims, and there are concerns about HMRC’s handling of the new requirements.

How we can help you

We work with R&D specialists who have years of experience and will help you navigate the complexities of making a valid R&D claim, helping you to receive the financial incentives you deserve. If you would like to discuss your R&D claim in more detail please get in touch with the team today.

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Please do not hesitate to contact us if you would like us to review your situation.

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The Government guidelines also offer an additional overview of R&D