HMRC issues new R&D guidance
By Susan Cattell, Head of Tax Technical Policy
20 November 2023
We highlight HMRC’s new guidance to help companies identify whether projects are eligible for R&D tax relief.
Guidelines for compliance – research and development for tax purposes
HMRC started issuing Guidelines for Compliance (GfCs) in 2022. The purpose of these guidelines is to give HMRC’s view on complex, widely misunderstood or novel areas to help taxpayers avoid non-compliance. They supplement existing guidance and include practical examples.
The latest GfC is intended to help companies identify whether work qualifies as research and development for the purposes of R&D tax relief.
Why is more guidance needed?
HMRC’s introduction to the GfC explains that HMRC continues to see many misunderstandings of what is (or isn't) research and development under the existing Department for Science, Innovation and Technology guidelines. Some companies apparently confuse the general meaning of R&D with what qualifies under these guidelines. The new GfC expands on HMRC’s view of the meaning of R&D for tax purposes, but makes clear that it does doesn’t change its view of the law.
How the GfC might help
The intention behind the GfC is to assist companies to avoid making common mistakes in R&D claims by helping them to:
- Understand HMRC expectations of claimants.
- Identify who is a competent professional, able to judge if a project is seeking an advance in science or technology for the purposes of an R&D claim.
- Find out if their work qualifies as R&D for tax purposes.
- Understand the meaning of ‘scientific or technological advance’ for the purposes of R&D claims.
- Identify the scientific or technological uncertainty that the project is seeking to resolve.
- Decide where the project begins and ends for the purposes of an R&D claim.
- Understand the evidence of a qualifying project HMRC may expect to see.
Reminder: new requirements for R&D claims
Claim notifications
For accounting periods starting on or after 1 April 2023, some companies must notify HMRC that they will be making a claim for R&D tax relief in advance of making the claim. The ‘claim notification’ must be submitted via an online form no later than six months after the end of the period of account.
HMRC has provided detailed guidance on when claims are required and the process for making them.
Additional information forms
From 8 August 2023, all companies making R&D tax relief claims must complete an additional information form (AIF) to accompany the claim. This applies to claims for both SME R&D relief and research and development expenditure credit (RDEC).
HMRC has provided guidance on who can submit the AIF and the additional information required. HMRC has already been removing invalid claims, submitted without the AIF.
Let us know your views
ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by members. We welcome input from members to inform our work; email tax@icas.com to share your insights and feedback.
