Draft legislation published today points towards a stricter regime and more administrative hurdles for SMEs wishing to claiming relief under the UK R&D schemes.
To tackle abuse of the reliefs, all claims to the R&D reliefs — either for a deduction or a tax credit — will in future have to be made digitally (except from those companies exempt from the requirement to deliver a Company Tax Return online)
These digital claims will have to break the costs down across qualifying categories and provide a brief description of the R&D. Each claim will need to be endorsed by a named senior officer of the company.
Companies will need to inform HMRC, in advance, that they plan to make a claim. They will need to do this, using a digital service, within 6 months of the end of the period to which the claim relates. Companies that have claimed in one of the preceding three periods will not need to pre-notify.
Claims will need to include details of any agent who has advised the company on compiling the claim.
To ensure the maximum benefit to the UK relief for subcontracted work and the cost of externally provided workers will be limited to focus it on UK activity, with some narrow exemptions.
More positively, for accounting periods beginning on or after 1 April 2023, the definition of qualifying expenditure is being extended to include expenditure on datasets and cloud computing software.
The new rules will place an additional administrative burden on SMEs wishing to make claims under the R&D schemes, but are being introduced in response to concerns (valid concerns in our view) that the schemes, in particular the SME scheme, are currently subject to widespread abuse.
The draft legislation is available to read here.