In this series of blogs, we’ll be taking you on a deep dive into the main differences between the SME and RDEC schemes and the new RDEC and ERIS schemes for R&D tax relief, making sure you know what additional information you’ll need to gather to prepare a claim under the new regime.
We’ve already covered off overseas expenditure and subcontractors. This week it’s the turn of Externally Provided Workers (EPWs). We’ll cover what information HMRC are now looking for in relation to EPWs and their costs, and how to fill out this part of the AIF.
While EPW costs remain an allowable expense for R&D tax relief, the amount of information that HMRC requires about these workers has increased significantly. In addition, EPW costs are affected by the restrictions on overseas costs.
Under the old SME and RDEC schemes, any EPW cost related to the resolving of technological uncertainties could be included in an R&D claim. The only information required by HMRC was the qualifying expenditure total, so the only data gathering required for claimants and advisors was the costs of EPWs and how much of this related to the R&D projects.
Under the new RDEC and ERIS schemes, HMRC asks for the following information about EPWS:
This means that for each and every EPW involved in the R&D projects, you’ll need to ask about their location and PAYE reference, and, for any overseas workers without PAYE references, why the claimant feels that the worker is exempt from the overseas restrictions.
If the claimant company can’t provide PAYE references or reasons that the EPWs are exempt from overseas restrictions for the EPWs alongside their costs and R&D apportionments, then the EPWS costs cannot be included in a claim for R&D tax relief. For this reason, it is imperative that advisors update their processes to make sure that this information is gathered alongside the rest of the costs data, and only eligible EPWs are included in a claim.
In summary, the new RDEC and ERIS schemes have introduced stricter requirements for claiming EPW costs, particularly around overseas activity and PAYE references. Ensuring that you gather all the necessary information at the outset – including the location, PAYE status, and exemption reasons for any overseas EPWs – will be essential to preparing a compliant and robust claim.
Next week, we’ll be exploring the complexities of splitting costs between the RDEC and ERIS schemes under the new Merged scheme – don’t miss it!
The new schemes bring new challenges, but with the right tools and support, you can navigate the process with confidence. WhisperClaims provides a structured framework, real-time feedback, and expert support to help you prepare robust, compliant claims.
If you’d like to find out more about how WhisperClaims can support your R&D tax service, why not book a demo?
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