R&D plans could catch out smaller companies

The Association of Taxation Technicians (ATT) is concerned that a requirement for companies to notify HMRC in advance that they intended to claim R&D tax reliefs risks denying tax relief to the very smallest and newest companies that need this relief the most.

The Association of Taxation Technicians (ATT) is concerned that a requirement for companies to notify HMRC in advance that they intended to claim R&D tax reliefs risks denying tax relief to the very smallest and newest companies that need this relief the most.

The advanced notification requirement forms part of a package of R&D measures included in draft legislation for Finance Bill 2022-23 which was released today.1 This states that, to claim R&D relief, companies will need to inform HMRC within six months of the end of the period to which the claim relates.

The ATT shares the Government’s general concerns over abuse of the R&D relief schemes and strongly supports efforts to crack down on such abuse of the tax system and improve compliance. But ATT is concerned2 that any requirement for companies to notify HMRC in advance that they plan to make a claim may affect the ability of companies undertaking genuine R&D to access the relief to which they are entitled. 

Jon Stride, Vice-Chair of the ATT’s Technical Steering Group, said:

“We are pleased to see that HMRC will allow companies up to six months from the end of their accounting period to notify an intention to claim R&D relief.  But this could still catch some companies out, leading to otherwise genuine claimants missing out on relief.

“In particular, the smallest and newest-formed companies, which are often most in need of the support offered by R&D relief, may not realise until they come to prepare their tax return (which is not due until 12 months after the end of the period) that they are able to make a claim.

“Preventing such businesses from accessing relief to which they would otherwise be entitled could affect their ability to grow their business and fund and carry out new research.  It is therefore vital for HMRC to clearly publicise this change, and to ensure the message reaches companies of all sizes and across all sectors.”

HMRC have indicated that advanced notification will need to be made using a digital service, and that companies that have claimed relief in one of the preceding three periods will not need to pre-notify.

Jon Stride said:

“Removing the need for advanced notification for existing claimants is a sensible step, and will reduce admin burdens for both businesses and HMRC.  However, it will not help those who have not, until now, realised there is the potential to make a claim.

“We welcome the introduction of a digital service for making notification, but would stress that this must be simple to use and that access given to both businesses and their tax agents.  We would also encourage HMRC to carefully consider the amount of information required in this pre-notification, as requiring significant amounts of detail could further restrict the ability of genuine claimants to access relief”


Notes for editors

  1. See https://www.gov.uk/government/publications/research-and-development-tax-relief-changes
  2. See https://www.att.org.uk/technical/news/att-warns-impact-rd-tax-relief-plan-small-companies for our previous concerns
  3. R&D reliefs provide support for companies working on projects which aim to make an advance in science and technology. There are two R&D relief schemes – one for Small and Medium-sized Entities (SMEs) and another for large companies (the R&D Expenditure Credit or ‘RDEC’ scheme). Where a company meets certain requirements they can claim additional relief on their R&D expenses in the form of an enhanced deduction (under the SME scheme) or a tax credit (under the RDEC scheme).  Where a company in the SME scheme makes a loss, they can surrender that loss for a payable tax credit from HMRC.  You can find more on the schemes on GOV.UK
Posted in: News