R&D Tax Relief Is Changing: Are You Ready for the New Rules That Could Impact Your Business?
With the introduction of significant reforms in the (Research and Development) R&D tax relief landscape, companies and their advisors must stay informed to avoid costly mistakes.
These reforms, aimed at reducing error and fraud, now include a critical requirement: R&D claim notification.
Shenal Wijetunge, Partner at DSW Tax Advisory, points out,
“The government’s approach to R&D claims has shifted toward ensuring that only genuine, well-documented research is rewarded. The introduction of claim notifications means businesses need to be proactive in their communication with HMRC.”
What Is an R&D Claim Notification?
R&D claim notification is a new process introduced by HMRC as part of its broader reform to tighten up the R&D tax relief system. It applies to certain businesses and ensures that they officially let HMRC know they intend to make an R&D tax relief claim. This pre-emptive step is crucial for companies claiming for the first time or those who have not submitted claims in the last three years.
As Shenal highlights,
“This is a preventative measure. It helps HMRC weed out ineligible claims early on while supporting genuine innovation in the UK. Companies that have long-term R&D plans will naturally benefit from this foresight.”
Who Needs to Notify HMRC?
The new requirement affects R&D claims for accounting periods starting on or after 1 April 2023. Companies must notify HMRC within six months of the end of their accounting period if they fall into one of the following categories:
- First-time claimants – Businesses claiming R&D tax relief for the first time must submit a claim notification form.
- Infrequent claimants – Companies that have not made an R&D claim within the last three years must also notify HMRC.
However, if your business has claimed within the past three years, you may be exempt from this notification process. It’s essential to calculate this carefully based on the final date of your claim notification period—six months from the end of your accounting period.
The Claim Notification Form: What You Need
To complete the claim notification form, you’ll need to provide several key details, including:
- Your company’s Unique Taxpayer Reference (UTR)
- The name of the senior R&D contact within your company
- Contact details of any agents involved in preparing or advising on the R&D claim
- Dates of the accounting period and a high-level summary of planned R&D activities
It’s worth noting that incomplete or incorrect submissions can lead to delays, so having all this information ready beforehand is crucial. Once the form is submitted, HMRC will confirm receipt and provide a reference number for future use.
Deadlines and Consequences
Missing the deadline for R&D claim notification can have severe consequences. If your business was required to notify but failed to do so within six months of the accounting period, you will be ineligible to claim R&D tax relief for that period.
For example, if your company’s accounting period begins on 1 April 2023 and ends on 31 March 2024, you will need to notify HMRC by 30 September 2024. Missing this deadline could result in your claim being denied, even if the R&D work qualifies for relief.
Shenal warns,
“Companies must pay close attention to the six-month notification window. If you miss it, there’s no second chance—you won’t be able to claim R&D tax relief for that period, no matter how valid your activities might have been.”
Why These Changes Matter
The changes in R&D claim notification requirements are part of a broader effort by HMRC to ensure the integrity of the R&D tax relief scheme. By tightening the rules, the government hopes to deter fraudulent claims and reduce errors while continuing to encourage innovation.
In summary, if your company plans to claim R&D tax relief for accounting periods beginning on or after 1 April 2023, you may need to notify HMRC well in advance. Failure to do so could result in your claim being denied. Staying informed and preparing early can ensure your business reaps the benefits of this valuable relief without unnecessary setbacks.
As Shenal Wijetunge advises, “The R&D tax relief scheme remains a fantastic opportunity for innovative companies. However, the onus is now on businesses to comply with the new requirements to secure their claims.”
Don’t let these changes catch you off guard. If you’re planning to claim R&D tax relief, make sure you understand whether the claim notification applies to you. Missing the deadline could mean missing out on valuable relief.
Reach out to Shenal Wijetunge and his team at DSW Tax Advisory to ensure your R&D tax claims are compliant and successful. Stay proactive and ensure you claim the benefits your business deserves!
