Embracing R&D Tax Change with Confidence: Your guide to HMRC’s Additional Information Form (AIF)
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With the Big4 firms now emphasising solutions that are “human-led, technology-powered” in their services to clients, we’re proud to highlight that we’ve been at the forefront of this approach for several years. Our technology, supported by our R&D tax experts, has played a key role in helping accountancy firms of all sizes to revamp their R&D services.
By combining their existing client knowledge with user-friendly technology, we’ve facilitated a straightforward and replicable business process. This approach not only streamlines the process of preparing an R&D tax claim but involves clients directly in the process. Many firms have successfully transformed their R&D tax services by utilising our tech, reducing time in the process and benefiting from expert support to ensure compliance.
The introduction of HMRC’s Additional Information Form in August 2023 materially changed the way R&D tax claims are prepared and submitted. We undertook a comprehensive re-engineering of our technology to bring it in line with HMRC’s reforms. As a result our customers have not been hindered by the newly imposed approach – quite the opposite in fact. Adopting our technology has enabled them to smoothly transition to the new process and ensure they maintain efficiency. Our AIF solution means that potentially complex and time consuming processes have been avoided and production of the AIF is completed in the minimum possible time.
By now any advisor operating in the R&D tax space should be aware of HMRC’s Additional Information Form (AIF). Sector awareness was shockingly low following the implementation of the AIF, as reported by HMRC, revealing that within the first two months of the new forms’ launch 50% of claims were submitted without a valid AIF. The recent Research & Development Communication Forum (RDCF) on 15th December 2023 reported that the failure rate has since reduced but that around 22% of all claims are still being rejected as a direct result of no AIF. This still feels high!
So how is WhisperClaims helping accountants embrace this new step with confidence?
Our innovative AIF solution requires no additional work on your part. As you prepare your client’s claim using WhisperClaims’ cloud based technology the app is simultaneously creating the R&D report and a corresponding AIF .txt file. Working through the question set you’ll not only establish how many project descriptions you need to include in your client’s submissions, you’ll get visibility of overall per project expenditure, so you can easily identify which projects you want to present to HMRC. Risk assessment checkers ensure that you cannot proceed without selecting the right number of projects in line with HMRC’s criteria.
The AIF .txt file, arguably the most significant benefit of our AIF solution, is stored within the dashboard – our handy .txt file guarantees you have all the information required to copy and paste directly into the portal meaning submissions are straightforward, efficient and guaranteed error free!
We regularly receive questions about the AIF during our App Showcase webinars, and through our support channels and WhatsApp group from customers. Here are just a few:
Do I still need to prepare and include a report alongside my client’s submission given how comprehensive the AIF is?
Yes. The report is for your client – the AIF is for HMRC.
There are some important aspects of a claim that the AIF does not seek clarity on – for example, it asks if the claim is SME or RDEC, or a combination of both, but does not ask for a justification. This is detail that should be covered in the technical report and is one of the reasons HMRC continues to emphasise that it’s best practice to still submit a report alongside the CT600.
As well as offering this additional depth of information to HMRC, the technical report is your way of conveying to your client the details of the claim. Should there be any questions raised from HMRC it’s critical your client has a clear and robust picture of the eligible work they have undertaken within the financial period and why it meets HMRC’s criteria. The report should be agreed on and signed off by both advisor and client. There are no official guidelines about what should be included, but best practice suggests some of the key elements included should be:
- Context for the R&D activity
- Detailed project descriptions (baseline, advance, difficulties/failures & resolutions)
- Cost per project analysis
- Name, qualification & experience of competent professionals
- Group structures / shareholdings
- Treatment of grants & subsidies….etc
In future, should the AIF become the only mechanism required for an R&D tax submission, there will always be a requirement for an advisor to prepare and share a report with their client to justify the claim that has been submitted on their behalf.
To learn more about writing strong project descriptions, why not download our “How to write an R&D tax relief narrative” ebook here
When do I need to submit an AIF for my client’s claim?
Filling out the AIF comes after you have prepared the report and had it signed off by your client and before you submit the CT600 or amended return and report. It is very important that you do this in the right order otherwise HMRC will reject the claim. Of course you can re-submit, but if the claim period expires within this time frame the claim will be lost.
What is the purpose of the AIF?
HMRC are using this digital data to build a picture about what claims are being received and which ones they should be reviewing more closely, as they go through their compliance checks. For example, the AIF asks for the company’s SIC code – this will help them to identify higher risk claims in obvious areas of non-compliance (i.e. care homes, restaurants, gyms). The form also asks who has prepared the claim – HMRC can therefore identify claims submitted by service providers that they want to keep an eye on.
The AIF has a 20,000 character limit for project descriptions – do I need to go into this much detail?
First of all, it’s the quality of the description and not the quantity that you want to focus on. Although the character limit for each of these sections is 20,000 characters (which equates to roughly 3-5,000 words), this is a huge amount of text and we’d recommend aiming for closer to 3-500 words per section (depending on the size & complexity of the project). We generally suggest that descriptions longer than this contain extraneous information about the commercial considerations and outcomes of the project, which is best avoided.
Why is the AIF output a .txt file?
Our solution is an unstyled .txt file for very good reason. There is currently no open interface to HMRC’s AIF portal so, at the moment, there is no opportunity to build a technical solution to facilitate the transfer of data. The simplicity of a .txt file ensures that as you are copying and pasting into the AIF portal, no additional characters are introduced.
Get in touch
The AIF is a vital step in the process and preparation of an R&D tax claim & represents a substantial transition for accountants. Our AIF solution removes the administrative burden associated with completing the new AIF form, enabling our users to swiftly navigate through the submission process whilst maintaining full compliance.
If you haven’t already download your copy of our guide to the AIF called “Get to grips with the Additional Information Form” here