Last year, HMRC published the findings from their 2021 investigation into fraudulent research and development claims. Their latest analysis estimates’ the overall level of error and fraud for both reliefs (Small & Medium Business and Research & Development Expenditure Credit) for 2020-21 is 16.7% (£1.13bn)’. This huge rise from previous years has prompted HMRC to crack down on fraudulent claims via Research and Development (R&D) forms.
New R&D Forms: What’s Changed?
The new measures aim to identify fraudulent claims before they’re complete and reduce the number of costly errors during processing. Firstly, those intending to make an R&D claim must submit a notification form before beginning their claim. This informs HMRC that they can expect a claim before receiving it. Secondly, an additional information form is required for all claims. This will include more details about the specifics of the R&D project. Keep reading for a full guide on the new forms.
How Do R&D Claims Work?
Companies with a budget for developing new products, processes, or services or enhancing existing ones are eligible for R&D tax relief. Investments in innovation can be reimbursed as either a cash payment or a corporate tax reduction. R&D claims exist in every sector, so the scope for potential claims is enormous. Those making claims for the first time can also claim for the previous two tax years. These variables have led to many administrative errors and individuals seeking to exploit the system fraudulently.
Businesses can claim R&D relief through the forms provided on HMRC’s website. R&D relief is calculated at different rates based on expenditure, profit, loss and other factors. It can be difficult for businesses to understand how to format their claims. However, our team of accountants at Digital Tax Matters are experts in structuring R&D claims for companies from all industries.
What Are The New Measures?
HMRC has introduced two new measures to tackle the rise in fraudulent R&D claims. Both are designed to give HMRC more notice and information to process each claim properly.
Claim Notification Form
For accounting periods beginning on or after 1st April 2023, a digital pre-notification form is required to inform HMRC before R&D claims. This will be mandatory for all those intending to claim R&D tax relief for the first time or if their last claim was made more than three years before the previous claim notification period.
The claim notification window starts on the first day of the accounting period and ends six months after the end of the accounting period.
To complete the claim notification form, you will need the following:
- The company’s Unique Taxpayer Reference (UTR)
- The main senior internal R&D contact responsible for the R&D claim
- The contact details of any agent involved in the R&D claim
- The accounting period start and end date for which you are claiming
- The period of the account’s start and end dates
- A summary of the high-level planned activities
Additional Information Form
From 8th August 2023, all R&D claims must be accompanied by an additional information form (AIF). This must be submitted online, or in some cases via email, before the company tax return (CT600) is filed. If a CT600 includes a claim for R&D relief and no AIF has been submitted, HMRC will automatically remove the R&D claim from the return.
The information required on the AIF is extensive. It includes details for each R&D project, from the baseline level of science to the level of science or technology the project plans to advance. It should also include reimbursement details, whether corporate tax relief, expenditure credits or both. Full details of the information required can be found within the guidance on GOV.UK.
Making A Claim
If either of these forms is not submitted on time or is incorrect, HMRC may reject the claim for R&D relief. For assistance organising these forms, don’t hesitate to contact us at Digital Tax Matters. Our team of accountants will walk you through each step of the process and ensure you file a claim that is right for you.