New changes to the research and development (R&D) tax credits regime have been announced, with an estimated 90,000 companies benefiting.
The changes will require businesses to apply for all reliefs online and pre-registration of claims irrespective of the company’s size.
Launching on 1 April 2023, companies claiming R&D expenditure credit (RDEC) and SME R&D relief will be impacted, as well some which have made a Patent Box election.
Additionally, all claims for R&D reliefs will have to be carried out digitally. This applies for either a deduction or a tax credit.
How can you inform HMRC?
HMRC will need to be notified in good time if you plan to make a claim.
This must be done using a digital service, within six months of the end of the period to which the claim concerns.
However, it will not be necessary to notify HMRC for those who have claimed in one of the prior three periods.
The time cap for making a claim will also change to two years from the end of the period of account to which they relate, as opposed to 12 months from the legislative filing date.
This aims to stop businesses which do not get a notice to file, because they either fail to register or alert HMRC that they are inactive, from getting extra time to make a claim.
How will SMEs be affected?
An additional measure will be launched to protect SMEs which are mid development, causing them to essentially drop out of the SME criteria.
Businesses transitioning from the SME scheme to RDEC will be safeguarded, meaning that where an SME within a group surpasses the size limits for an SME, all firms in the group will keep SME status for one subsequent year.
Currently, while the corporation itself preserves its status, others in the same group lose theirs immediately.
For companies who use external workers to carry out R&D, such as subcontractors, spending on those workers will only be eligible to the degree that their earnings are taxed through PAYE, or attributable to R&D activity outside the UK covered by the new section 1138A, which allows certain overseas expenditure where the activity cannot take place in the UK.
If you require support with R&D tax credits, please get in touch with your Seymour Taylor representative, email us at enquiries@stca.co.uk or call us on 01494 552 100.
This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at time of publishing on 18 August 2022.