A conversation between people on R&D tax

Research & Development Communication Forum Update

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Last week, we attended HMRC’s R&D Communication Forum (RDCF, formerly the RDCC). As this came hot on the heels of the Government’s recent announcements on Research and Development, there was much to be discussed!

As we’ve recently written about in our R&D Consultation Outcome and Upcoming Changes blog, the proposals from the Treasury focus mainly on abuse of the system and how to ensure that UK companies are the true beneficiaries of the scheme.

With this in mind, from April 2023, claimants will be required to

  • give advance notification of their intention to make a claim;
  • submit all claims digitally; 
  • include details of any agents involved in compiling the claim;
  • make sure the claim is signed off by an officer of the company.

This was discussed at length, and all seems quite logical, except when it comes to giving advance notice. Given that you may not be aware you have qualifying activities until you actually hit your first “technical uncertainty”, how this will work in practice is very much up in the air. HMRC spoke of a portal where claimants can notify their intention to claim, but this is very much in the planning stage. There will also be additional fields to complete in the CT600L, so watch this space.

The proposed rules around subcontractors and EPWs designed to ensure payments remain within the UK were also a hot topic. The current proposals are that from 2023, these costs must be incurred by UK PAYE staff. HMRC discussed the potential exceptions to the rule, for example when R&D absolutely needs to take place abroad for scientific reasons. We HMRC are still seeking responses to these proposed changes, so we expect further tweaks and clarification through 2022.

Talk then turned to new costs that can be included in a claim. There was some clarification of the inclusion of Cloud and Data costs. HMRC stated that not all costs will qualify – only those which can be attributed to data processing, software, computation and analytics. Quite how these specific costs can be identified and ring-fenced is up for debate. HMRC also announced that, due to the fact the Government’s new 1.25% Health and Social Care Levy will be collected by HMRC, these costs can also be included in the overall staff costs.

Finally, there was some good news from a processing perspective:

  • YTD, 23,755 SME and 2,804 RDEC claims have been processed
  • 91% of these were processed within 28 days, which is up from 88% on this time last year. 
  • Claims are currently being processed at day 24 for SME and day 43 for RDEC.

Given most HMRC are still working remotely, this is a decent churn rate.

How to write an R&D tax relief technical narrative

With HMRC’s new mandatory requirement for project descriptions on all submissions, we wanted to share our experiences to help others to write their best possible technical narratives.

Available to download here.

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