Finance (No. 2) Act 2023 introduced two new forms for companies making R&D claims. The requirement to complete these forms applies to tax relief or tax credits claimed under the SME R&D regime and to the R&D expenditure credit (RDEC).
A digital additional information form (AIF) must be completed before submitting any company tax return that contains an R&D claim. This requirement came into force for claims made on or after 8 August 2023, regardless of the accounting period to which the claim applies.
New claimants or infrequent claimants may also need to notify HMRC in advance of making an R&D claim for accounting periods beginning on or after 1 April 2023. The notification window is quite tight, so care is needed to ensure that this requirement is not overlooked.
When is notification in advance required?
A company (or their agent) is required to tell HMRC that they are planning to make an R&D claim for an accounting period beginning on or after 1 April 2023 if:
- they are making an R&D claim for the first time; or
- their last R&D claim was made more than three years before the last date of the claim notification period (HMRC’s guidance refers to this as the three-year exemption). The exemption applies to any type of R&D claim made during that three-year period (ie, RDEC, R&D tax credit, or an additional deduction under the SME scheme).
There is also a transitional rule to be aware of. This states that for the purposes of determining whether a claim has been made within the three-year window ending with the end of the claim notification period, any R&D claims made for an accounting period beginning before 1 April 2023 are ignored if they are included in the company’s tax return only by virtue of an amendment made on or after 1 April 2023.
If a company is required to make a claim notification and fails to do so, it will be unable to make an R&D claim.
The claim notification period runs from the start of the period of account and ends six months after the end of the period of account that the R&D claim relates to.
Example 1 – first-time claimant
A first-time claimant company plans to make an R&D claim for qualifying R&D expenditure incurred in its 12-month period of account that runs from 1 October 2023 – 30 September 2024. To make an R&D claim in its company tax return for that period, it must first notify HMRC in advance during its claim notification period of 1 October 2023 – 31 March 2025.
Example 2 – checking the three-year exemption
A company has an accounting date of 31 March each year. Its filing and R&D claim history is as follows:
|Date claim made
|Claim for R&D tax credit
|Claim made in return filed on 15 March 2021
| 31 March
|No claim made
|Return filed on 26 February 2022
| 31 March
|Claim for R&D tax credit
|Claim made in an amended return filed on 15 April 2023
| 31 March
|Planned claim for R&D tax credit
| 31 March
|Planned claim for an additional deduction under the SME scheme
The company does not need to notify HMRC of its planned claim in respect of its accounting period ending 31 March 2023 as the requirement to notify HMRC in advance of making a claim does not apply to that period.
The company needs to consider if advance notification is required for the year ending 31 March 2024. The claims notification period for the year ending 31 March 2024 runs from 1 April 2023 – 30 September 2024.
The three-year exemption would generally apply if the company has made a previous R&D claim in the three-year period from 1 October 2021 – 30 September 2024. Even though an R&D claim was made within that window on 15 April 2023, the transitional rule means that that claim must be ignored as it is a claim for an accounting period beginning before 1 April 2023 and it was made by virtue of an amendment filed on or after 1 April 2023.
Therefore, the company must notify HMRC by 30 September 2024 that it plans to make an R&D claim for its year ended 31 March 2024.
What information is needed for the claim notification form?
The basic information includes the company’s unique taxpayer reference (UTR), the name and contact details (telephone number and email address) of the senior R&D contact within the company who is responsible for the R&D claim, any agent details, and the accounting period / period of account start and end dates relating to the R&D claim.
However, details about the R&D claim are also required. The legislation requires details about the number of R&D projects and an overview of those projects. HMRC’s guidance indicates that it expects this to demonstrate why projects meet the standard definition of R&D.
When is an AIF required?
An AIF is required before submitting any company tax return that contains an R&D claim on or after 8 August 2023. In the period to 3 September 2023, HMRC reported that almost half of all R&D claimants had failed to submit an AIF.
Finance (No. 2) Act 2023 also introduced a power for HMRC to remove R&D claims from a company tax return where an officer of Revenue and Customs reasonably believes that a claimant company has failed to comply with a requirement relating to the making of the claim. This includes a failure to submit the AIF before making an R&D claim in the company tax return.
What information is needed for the AIF?
For companies that have submitted a claim notification, there will be a limited amount of duplication with the AIF. However, the AIF requirements are extensive.
The legislation specifies that the AIF must contain the information set out in the table below.
|The company officer responsible for ensuring the accuracy of the information provided in the AIF
|The R&D claim
The R&D projects
If the R&D claim is for:
Note: There is a known technical issue with the inbuilt data validation within the AIF. Where a company has both SME and RDEC expenditure, the AIF currently requires project descriptions covering both 50% of the SME expenditure and 50% of the RDEC expenditure instead of 50% of the total qualifying expenditure. The suggested workaround is to include the number of project descriptions required to get 50% coverage of the total qualifying expenditure, and then in the extra project write-up boxes generated by the AIF, add a comment about the approach adopted.
While much of this information may be subsequently set out in an R&D report to support a claim, the AIF dictates a standardised approach to allow HMRC to risk assess claims.
HMRC’s guidelines for compliance include guidance on record keeping and apportionment where accounting systems are unable to record costs attributable to specific projects.
Companies and their agents need to factor in the time to gather the information required for the AIF as it has to be submitted before the company tax return. This might include capturing third-party information that was not previously required (eg, PAYE references for EPWs).
Completing the claims process
The company tax return (CT600) contains additional boxes relating to these forms.
If the company had to submit a claim notification form, it should put an ‘X’ in box 656 of the company tax return to tell HMRC that a claim notification form was submitted. An ‘X’ in box 657 indicates that the AIF was submitted.
Note: there is a known error preventing some RDEC claimants from making an entry in both box 655 (indicating that the claim is made by a large company) and box 657. Read what to do if this occurs.
- 21 Nov 2023 (12: 00 AM GMT)
- Updated to reflect further information about the additional information form and HMRC's guidelines for compliance.
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