More is needed to tackle R&D abuse and improve compliance despite the improvements to legislation made as part of the Government’s Finance Bill, according to RSM UK.
The new bill confirms that claims for R&D reliefs must be made digitally, due to come into effect for accounting periods beginning on or after April 2023.
It said these digital claims will have to break the costs down across qualifying categories and provide a brief description of the R&D. Each claim will need to be endorsed by a named senior officer of the company.
Companies will also need to inform HMRC, in advance, that they plan to make a claim. They will need to do this, using a digital service, within 6 months of the end of the period to which the claim relates. Companies that have claimed in one of the preceding three periods will not need to pre-notify.
Claims will need to include details of any agent who has advised the company on compiling the claim.
However, RSM said these moves “present a clear risk” of preventing companies from making otherwise legitimate R&D claims, simply because they are not aware of the relief or whether their activities qualify.
Darren Griffin, innovation relief tax director, said: “It is clear more needs to be done to prevent substandard R&D claims being submitted to HMRC. However, the draft legislation published today presents a clear risk of preventing companies from making otherwise legitimate R&D claims, simply because they are not aware of the relief or whether their activities qualify.
“That could be a bitter pill to swallow for start-up and fledgling companies and may result in such companies losing out on valuable benefits. For companies inadvertently impacted by the new rules, it could turn off a valuable tap for cash flow, stunting their ability to grow, develop IP and create jobs.”
He added: “Claims must disclose expenditure by each qualifying category; include a short description of the R&D; and be endorsed by a senior officer of the company.
“Advance notification will also be required, via the digital service, no later than six months after the end of the period to which the claim relates. If a company has claimed in one of the three previous periods, it is exempt from making a notification. Companies will also have to include details of the adviser used to prepare and submit the claim.”