Research and Development Tax Relief reform

Haines Watts : Research and Development Tax Relief reform

Following the review of the Research and Development (R&D) tax reliefs launched in the 2021 Budget, new draft legislation has now been released regarding the changes to R&D tax relief claims, the measures will apply for accounting periods beginning on or after 1 April 2023.

Whilst some changes were relatively minor, others will have a significant impact on companies seeking to claim R&D tax relief, particularly those with overseas operations and new claimants. Moreover, with HMRC being granted new powers to reject claims and claw back excessive tax credits, making early preparation will be more important than ever, to ensure that claims are successful.   The most important points were covered by our Incentives and Reliefs Team, in a previously published blog post you can read here. 

However, I wanted to draw your attention to the following which may be of particular interest:

• Requirement to provide extensive disclosure around R&D activities – we will be updating our R&D reports to ensure they remain compliant. Please note, it will likely no longer be possible for financial claims to be submitted without concurrent R&D reports.  
  
  
• New HMRC powers to remove claims – we suggest considering timings regarding your next claims.  You should consider possible options for bringing forward claim timings as there will be more risk going forward with claims which are filed very close to the deadline (2 years after the end of the accounting period). 
  
  
• Overseas R&D activity – if your claims currently include expenditure on overseas subcontractors; then these costs will cease to qualify for relief for accounting periods beginning after 1 April 2023.

If you would like to discuss the impact on your claims, please contact us. R&D tax relief rules can be complex and the new legislation is likely to require significant changes to the way claims are currently made. Seeking advice early will be the best way to ensure that your company will continue to be able to access the generous reliefs.

Our specialist R & D team are on hand to help you continue to make compliant claims for tax reliefs, and keep abreast of the complex changes coming into play.  

You can read the full updated HMRC policy paper here.