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HMRC guidance on handling R&D tax relief claims


Published: 15 Aug 2023 Update History

New guidance in HMRC’s corporate intangibles research and development (CIRD) manual focuses on procedures for companies with customer relationship managers but includes some points of wider interest that would also apply to smaller companies.

The new guidance in HMRC’s corporate intangibles research and development (CIRD) manual can be found as an update to CIRD80370

From 8 August 2023, all companies making a claim under the SME scheme or RDEC are required to complete an Additional Information form. This form must be provided before the Company Tax Return is submitted. 

HMRC states that: “There is no pre-determined expectation of the amount of information required to be provided for any individual project when completing the Additional Information form. What you provide should be sufficient to explain to HMRC why the project qualifies for R&D relief/RDEC. Where we do have questions about your projects, we can write to you for further information.”

Where the company has a Customer Compliance Manager (CCM), the two may agree the amount of detail to be included, if this takes account of HMRC’s knowledge of a group’s R&D activities and claim preparation process.

Helpfully, if a project extends across multiple claim periods, companies can reuse the text box entries from previous Additional Information forms, updated where necessary if the project uncertainties or activities have changed.

In addition, where a company makes a claim that covers an excess of ten projects, guidance is included as to what might be acceptable disclosure in situations where the top 10 projects by qualifying expenditure is not a fair representation of the R&D done.

Submitting R&D reports

HMRC is keen to stress that companies and agents should continue to submit R&D reports as they often contain additional information such as details of competent professional experience and R&D claim methodology. Good practice includes:

  • Ensuring the advance and uncertainties are described specifically and sufficiently, not simply the commercial aim of the project.
  • Explaining the methodology used to calculate the claim.
  • Explaining and detailing the background records and systems used to identify qualifying activities and costs, eg information about the use of project documents, timesheets/time recording systems, estimates etc.
  • Showing expenditure and eligibility breakdowns by project.
  • Showing how the identified expenditure/R&D percentage(s) applied to individual(s) links to the qualifying activities which are described.

Use of sampling

The guidance also includes some helpful guidance on sampling where the extent of the work involved in preparing a fully detailed claim would be disproportionate compared to the benefit received. Where there are a significant number of projects and records, the company or agent should agree a suitable sampling with an R&D specialist in advance of the claim.

The process involved in arriving at the sample must be transparent, open and utilises the information that is held and available from the company in a way that gives an answer consistent with the work and cost incurred by it.

As a guide, where like projects are grouped together, a minimum of 15 such projects will need to be sampled as any fewer would be too small a sample to provide a reliable result. 

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