R&D Tax Legislation Update April 2023

What you need to know about recent changes to R&D Tax Relief?

The Government has brought about new changes to R&D Tax Relief that are effective from April 2023. These changes mainly lie around the claim process, and this is very important to anyone that deals with R&D Tax claims to ensure greater care is given when preparing the R&D claims.

What are the updates to R&D Tax Claims from April 2023?

In April 2023, there were a number of changes that came into effect in the Governments approach to tighten up on poor R&D tax compliance, these include:

• The requirement to produce a Technical and Financial Report to accompany the R&D claim.  This has previously been seen as best practice, but this is now a mandatory requirement.
• The requirement for the claimant to notify HMRC of their intention to make a claim within 6 months of their accounting period end date. This will need to be done by using a digital form and will apply to all claims starting on or after 01 April 2023.  The exception is where a claimant has already filed a claim in any of the previous three calendar years or where the claim has been made within 6 months of the period end date.
• Claims must be endorsed by a senior company official, with their contact details provided.
• Any agent who advises the claimant on compiling the claim must be named.
• There is also a requirement for an additional information form that will need to be completed digitally, before the filing of the CT600L, this will be required from 01 August 2023.
• The above are administrative changes but there are also further changes within the R&D scheme that have come into effect, and these include:
• The SME R&D tax relief enhanced expenditure rate has been reduced from 130% to 86% and the cash rate on the surrendered loss reduced from 14.5% to 10%.  However, for larger organisation’s making claims the RDEC rate has increased from 13% to 20%.
• ·Pure mathematics is now a qualifying activity for R&D purposes.
• ·The inclusion of data licenses and cloud computing are now allowed as qualifying expenditure for R&D purposes.
• There will be new support to a newly defined group of R&D intensive industries in the form of an enhanced tax credit available to loss making companies whose R&D expenditure is at least 40% of all expenditure.  Qualifying companies will be able to surrender losses at 14.5% instead of the new 10% rate under the new scheme.