Businesses engaged in Research and Development (R&D) projects can leverage Corporation Tax relief on eligible project costs, provided they align with HM Revenue and Customs (HMRC) R&D criteria.
Recent adjustments to the R&D tax relief scheme by HMRC have introduced new procedures. While companies are adapting to the mandatory ‘Additional Information Form’ implemented on 8th August 2023, another change on the horizon is the prerequisite to pre-notify HMRC of an intent to claim R&D relief.
This new stipulation holds particular significance for entities unfamiliar with claiming relief or those who haven’t done so for some time. It’s perceived as a measure to deter misuse and enhance compliance with the scheme.
When does pre-notification become mandatory? Pre-notification becomes compulsory for all accounting periods starting on or after 1st April 2023. This means that the first affected accounting period will be the one ending on 31st March 2024.
Companies must inform HMRC within six months from the end of the relevant accounting period to be eligible for R&D tax relief. For instance, a company with a year-end of 30th April 2024 must notify HMRC of its intention to claim R&D tax relief by 31st October 2024.
What information does HMRC require? Apart from general company particulars, a company must provide a synopsis of the ‘high-level planned activities.’ For instance, if a company has developed software, it should outline the intended use of the software to demonstrate compliance with HMRC’s R&D definition. No evidence is required at this stage; it should be furnished with the Additional Information Form during the claim submission.
Pre-notification is facilitated through an online form accessible via a Government Gateway account, and can be completed by a company representative or an appointed advisor.
What if a company fails to notify HMRC? Similar to the Additional Information Form regulations, any R&D claim submitted to HMRC without prior notification will be disregarded from the company tax return, resulting in denial of relief, regardless of its eligibility.
Are there any exemptions from this requirement? Yes, companies that have previously claimed R&D tax relief are exempt from pre-notification if they’ve made an R&D claim in any three years leading up to the pre-notification deadline.
For instance, if a company’s year-end is 30th September 2024, it must notify HMRC by 31st March 2025, but it’s exempt from pre-notification if it has made an R&D claim between 1st April 2022 and 31st March 2025. This exemption might catch out companies that have extended their accounting periods but haven’t claimed R&D relief annually.
What are the implications for my company? If your company hasn’t previously claimed R&D tax relief or hasn’t done so in the past three years, it’s imperative to notify HMRC of your intent to claim relief within the stipulated timeframe.
Even if your company is uncertain about its eligibility for an R&D claim, it’s advisable to submit a pre-notification form. HMRC doesn’t mandate claim submission if the company later decides against pursuing the claim or finds the project ineligible.
