After a slow start the number of R&D claims submitted by companies to HMRC has grown significantly over the last few years. Whilst HMRC are still keen to encourage companies to claim where eligible, there are proposals that would take effect from 1 April 2023 that will tighten a couple of areas and lead to more compulsory disclosure. We take a look at the proposed changes for R & D claims:
Restriction on R&D work completed outside the UK
- Expenditure in relation to subcontractors and externally provided workers will need to relate to work physically performed in the UK. There are limited exceptions around this and essentially you would have to prove it would be extraordinarily difficult to complete the work in the UK. The price and availability of staff will not be reasons to treat as an exception.
- This will include recharges from group companies outside of the UK, so if for example software development occurred in a German subsidiary but was recharged to the UK company in a management charge, it would be caught within this provision under subcontractor costs.
Cloud computing costs
- Costs incurred on cloud computing and data licences to enable the R&D will now fall under the definition of software and will be eligible in a claim.
Notification to HMRC of an R&D claim
- New claimants or those who have not claimed in the previous three accounting periods will have six months after the year end to notify HMRC of their intention to make an R&D claim. The notification will be online but HMRC have not released the exact proposed method yet.
Increased disclosure with any claim
- For accounting periods starting on or after 1 April 2023, a report detailing the claim will have to be submitted with the corporation tax return, and will need to detail who the advising agents are and be signed separately to the return by a senior officer of the company.
R&D claims remain an attractive tax relief, and with a wider remit than you may originally believe it is always worth running any queries past a tax advisor to make sure you are not missing a trick. If you would like to discuss your companys’ position with regards to corporation tax and R&D claims, please get in touch.