Overview of Changes to the R&D Scheme

Over the last couple of years, there have been many changes to the R&D scheme.

For older company financial years, R&D claims can be submitted at any point up to the second anniversary of a financial year-end date. For more recent periods the same is true provided that a notification of an intention to claim R&D relief has been made to HMRC within 6 months of the end of the year.

Most of these changes will apply to the whole of a company year, with the exception of rate changes, which generally apply to expenditure from 1st April in a year. However, some are more immediate, such as the changes in submitting the additional information form online, impacting all claims submitted from 8th August 2023. If you are submitting claims for two financial years, changes could also affect the years differently. This is just a general overview of the new rules and when they come into effect. We go into more detail on all of these changes on other parts of the website.

For accounting periods starting on or after 1st April 2021

  • Tax Return Submission– Introduction of the mandatory CT600L supplementary pages of the company tax return for SMEs claiming tax credits and all RDEC claimants.
  • Tax Credits – Introduction of a cap on the size of payable SME R&D tax credit, calculated based on the PAYE/National Insurance liabilities of the company x 3 plus £20,000. (A similar (but different) cap for RDEC payments already existed.) From 1 April 2024, a similar cap will apply to the merged RDEC scheme.

For accounting periods starting on or after 1st April 2023

  • Pre-Notification – HMRC now requires you to submit a notification form within 6 months of your year-end date, stating that you intend to make an R&D claim and identifying the R&D project(s). Failure to submit this notification will mean that you will not be able to submit an R&D tax relief claim for that year. This is a big change, as it creates a new step in the R&D process, and potentially can prevent you from being able to claim at all, further information about this change can be found here.
  • Qualifying Costs – Cloud computing and the purchase of (large) data sets can now be included in your claim

For all claims submitted from 8th August 2023

  • Submission of Additional Information form – This is a new form that has to be submitted to an HRMC online portal before your accountant submits the tax return for the year. Failure to do so will result in an automatic rejection of a subsequent R&D tax relief claim. The form requires a senior responsible officer of the claiming company to be identified.

Published 30 October 2023, affecting all accounting periods  

  • Record Keeping – This is potentially the most extensive change affecting the claiming company, as companies must implement these changes themselves throughout the year. HMRC now expects more detailed records to be kept about projects containing R&D. A company must evidence any project where R&D has taken place, before, during, and after a project. A claiming company would be very unwise if they did not keep clear records of the work being done, any issues that have arisen and the results of the project. This includes keeping records of the time that people spent on R&D, who the competent professional(s) were, and any costs associated with the project. This is significant, and it is essential that you read our more detailed view on record keeping here.
  • Competent Professionals – There is now a requirement to name a competent professional, who has judged what was considered to be an advance, where R&D was taking place, and when the R&D activity within projects started and ended. The person named must be knowledgeable about the principals involved in the project and aware of the current state of scientific or technological knowledge in the necessary field. There are requirements for a competent professional which link to record keeping, that you can find here.

For accounting periods starting on or after 1st April 2024

  • Subcontractors and Externally Provided Workers – Additional data must be collected for costs for Externally Provided Workers to qualify (need evidence of payroll deductions.)
    • New rules changing the scope of subcontractor costs that can be claimed. Details can be found here.
  • Where R&D is conducted – R&D will generally need to take place in the UK mainland territory to qualify.  This includes both subcontractors and agency workers (externally provided workers).
  • Merging of the SME and RDEC schemes – Introduction of a cap on the size of payable SME R&D tax credit, calculated based on the PAYE/National Insurance liabilities of the company x 3 plus £20,000. (A similar (but different) cap for RDEC payments already existed.) From 1 April 2024, a similar cap will apply to the merged RDEC scheme.