Advance notice on R&D claims from 2023 - are your clients ready?

RICHARD HILL DIRECTOR OF INNOVATION TAX RELIEFS

Advance notice on R&D claims from 2023 – are your clients ready?

Amongst the mixed bag of announcements regarding the R&D tax relief schemes to take effect in 2023 was the decision by HMRC to require “advance notice” from any company intending to submit a claim. We are still yet to see any formal draft legislation outlining what form this notice will take, but from comments made at the R&D Consultative Committee it is clear that HMRC are seeking a “sooner rather than later” approach.

In my view, it is unlikely that they will succeed in requiring companies to give notice before their year begins, as was mooted by HMRC at one stage, but it is quite possible that companies will no longer be able to make retrospective claims of even 1 year, contrasting to the 2 year window that we currently have.

If companies need to put in notice before their year-end, a great deal of decision making will need to come forward. R&D projects will need to be identified as they take place, and analysis begun from before the year end. Even in a best case scenario, it is likely that the claim will need to be made with the original submission of the tax return, and not by amendment.

This all adds up to a situation where claims need to be made at least 12 months earlier than has been habitual for some companies. If we have clients that are making amended claims year on year, and are getting anywhere near the statutory deadlines, they need to be aware that this will no longer be a viable strategy. This could be an opportunity to work more closely with these clients and improve their processes for getting us information. Accelerating the claims also means accelerating our fees, so this is an opportunity to improve both the client’s cashflow and ours at the same time!

While HMRC’s decision is not what businesses would wish for, we need to take the positives from it, and prepare our clients well in advance. Managed well, this evolution in timing can be relatively stress free and cashflow positive for our clients, rather than a nasty surprise in a year’s time!