There's big changes coming to R&D tax relief from August - are you all set?
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How to Prepare for the Changes to R&D Tax Credits from August 2023
Introduction
As a leading specialist in tax advice for UK businesses, RDI Solutions understands the significance of R&D tax credits and their impact on business funding. Research and development tax credits (R&D tax credits) play a crucial role in encouraging innovation and growth for businesses. Staying informed about the latest changes and updates to R&D tax credits is essential to ensure businesses can maximise their benefits and make strategic financial decisions.
R&D tax credits are a government incentive designed to reward businesses that invest in research and development activities. By offering tax relief on eligible R&D expenditures, the government aims to promote innovation and technological advancements across various industries. These tax credits not only drive business growth but also support the overall economic development of the country.
What's New for R&D Tax Credits in 2023
In 2023, there have been some significant changes to the R&D tax credit system. Businesses need to be aware of these updates to take full advantage of the benefits they offer. The changes may include adjustments to qualifying criteria, eligible expenditure, or the application process. Staying updated with these changes is crucial to ensure accurate and timely claims.
R&D Tax Credit Rate for 2023
The R&D tax credit rate for 2023 determines the percentage of eligible R&D expenditure that businesses can claim as a tax credit. Understanding this rate is vital for businesses to calculate their potential savings. The rate may vary depending on the size of the company and the level of qualifying R&D activities. Businesses must take advantage of the most favorable rate to maximise their financial benefits.
Updates for R&D Tax Relief
Apart from changes to the tax credit rate, there might also be updates to R&D tax relief schemes. These updates could provide additional opportunities for businesses to claim tax relief on their R&D activities. R&D tax relief aims to reduce the financial burden on companies investing in innovation. Businesses should explore these updates to optimise their R&D tax relief claims effectively.
Changes in R&D Tax Credits from August 2023
From August 2023, specific changes will be implemented in the R&D tax credit system. These changes may impact how businesses claim R&D tax credits and could affect the overall benefits. By proactively preparing for these changes, businesses can ensure a smooth transition and avoid potential disruptions to their claims.
What's an Additional Information Form?
As per the name (Additional Form), HMRC will require additional information to process an R&D claim benefit.
The additional information requires administrative details such as:
Contact details of the main senior internal R&D contact in the company who is responsible for the R&D claim.
Contact details of any agent involved in the R&D claim.
VAT registration number.
Employer PAYE reference number.
Unique Taxpayer Reference (UTR).
Identification of business type, for example, your current SIC (Standard Industrial Classification) code.
List the total amount of R&D projects in the financial year.
The Additional Information Form also delves into the particulars of the claim, asking for the following:
A breakdown between direct and indirect qualifying R&D activities.
A breakdown of the R&D costs allocated to each R&D project.
A standardised set of questions for each R&D project narrative:
What is the main field of science or technology?
What was the baseline level of science or technology that you planned to advance?
What advance in that scientific or technical knowledge did you aim to achieve?
What scientific or technological uncertainties did you face?
How did your project seek to overcome these uncertainties?
For businesses inexperienced in claiming R&D tax credits, understanding technical terms and producing comprehensive technical reports might be challenging. However, it is crucial to do the necessary research to ensure accurate and successful claims.
If you want to learn more or understand the differences between the old claiming method and the new Additional Information Form, you can read our easy-to-digest guide. Another option is to refer to HMRC’s guidance.
Reassess the way you claim
Businesses can self-assess their eligibility and capabilities to claim R&D tax credits using the new process. If adopting the new method appears more demanding than the current one and requires additional time, businesses should evaluate the potential risks. Seeking assistance from an R&D specialist like RDI Solutions may be worthwhile to ensure accurate and optimised claims. Here, at RDI, we have made several changes to our operations to align with the new requirements, providing clients with compliant and optimised claims.
Select a trusted partner to help you compliantly put together your R&D tax claim?
Over 3,000 UK businesses have trusted RDI Solutions to help them with their R&D tax relief claims. Our expert team of over 130 in-house tax experts are industry specialists. We will ensure to not only maximise your R&D claim but to put it together for you in the most compliant possible manner.
Please get in touch with one of our experts today if you have any further questions.
