Research and Development tax relief changes
The Government has recently updated some elements of the Research and Development (R&D) tax relief application process.
Many SMEs will already be aware of the changes that took place in April in regard to the rates of relief, but now they must also deal with extra administration through the Additional Information Form (AIF).
The first change which has taken place is the application deadline. Whilst originally set to 1 August 2023, it has now been pushed back to 8 August 2023.
This extension will enable businesses to gather any more supporting evidence, if necessary, as well as make any other changes to their application should they feel it more appropriate.
Additional Information Form
From 8 August 2023, you must also supply an additional information form before you supply your Corporation Tax Return.
Either a representative of the company or an agent acting on behalf of the company can complete and return the AIF.
To fill out the AIF, there is a list of information that is needed. This includes the company’s:
- Unique Taxpayer Reference (UTR)
- PAYE reference number
- VAT registration number
- Business type (such as your current Standard Industrial Classification code)
- The accounting period start date for the year which you are claiming tax relief from
You will also need the contact details of the main internal R&D contact in the company who is responsible for the claim, as well as the contact details of any agent who is involved in the R&D claim so that should any problems with the application arise, the right people will be notified.
After you have gathered all this information, you will then need to include information about qualifying expenditures, qualifying indirect activities, project details, as well as greater detail about the project(s) you are undertaking.
There are further details regarding the recent changes to these latter sections below.
One of the further changes which have taken place is regarding the qualifying expenditure rules.
Previously, there was a larger number of costs which could be claimed for by both SME R&D and RDEC under the grant, including fuel, power, and water costs. It should also be noted that whilst subcontractor costs are still qualifiable for expenditure credit, but not all of the costs will be covered.
However, whilst these cuts have been made, there are still several consumable items which remain qualifiable, such as the materials needed for the project to take place, as well as software and staffing.
Now this change has taken place, it is important for companies relying on this grant to consider if they need further financial help for the funding of the utilities that have now been removed. If this is the case, it is vital that they ensure they can get this from elsewhere so that the project can still go on.
Qualifying indirect activities
There have also been changes to what is now classed as a qualifying indirect activity.
Whilst there are no specific additions or removals, there has instead been greater clarification on what is classed as a qualifying indirect activity.
This includes ancillary activities, training, and academic research that will go towards the project.
The final recent change to the R&D tax relief application is within the ‘project details’ section of the form.
Here, there has been an alteration to the ‘11 to 100 or more projects’ section. Now, instead of only describing the ten projects which have the most qualifying expenditure attached to them, you must also clarify the description of the appreciable improvements.
If you need advice about R&D tax relief or other types of Corporation Tax relief, contact us today.