Research & Development Tax Relief – new requirement to pre-notify HMRC

Companies who carry out Research and Development projects can claim Corporation Tax relief on some or all of the costs of their projects, subject to the project meeting HMRC’s definition of R&D.

HMRC has recently introduced several changes to the Research and Development (R&D) tax relief scheme, and whilst claimants are now getting to grips with the new ‘Additional Information Form’, which became compulsory on 8 August 2023, the next change on the horizon is a requirement to pre-notify HMRC of a company’s intention to claim R&D relief.

This latest requirement will be particularly crucial for companies who haven’t claimed the relief before or haven’t claimed relief for a few years.

It is considered that this rule has been introduced as a further measure to tackle abuse and improve compliance with the scheme.

When will a company be required to pre-notify HMRC?

Pre-notification will apply to all accounting periods beginning on or after 1 April 2023. This means that the first accounting period which will be affected will be the year ended 31 March 2024.

A company must notify HMRC within six months of the end of the accounting period in which the R&D project took place, to be able to claim the R&D tax relief. For example, a company with a year-end of 30 April 2024 must notify HMRC that it intends to claim R&D tax relief by 31 October 2024.

What information does HMRC require?

Aside from some general company details, a company will be required to provide a summary of the ‘high-level planned activities’, e.g., if a company has developed software, it should state what the software will be used for, to show that the project meets HMRC’s definition of R&D. The company will not be required to include evidence – this should be provided on the Additional Information Form when the claim is submitted.

Pre-notification is submitted to HMRC via an online form which is accessed through a Government Gateway account and can be completed by a representative of the company or an adviser acting on behalf of the company.

What happens if a company does not notify HMRC?

In a similar vein to the rules on the Additional Information Form, any R&D claim submitted to HMRC without first notifying will be removed from the company tax return and the relief will be denied, regardless of whether the claim is eligible.

What does this mean for my company?

If your company hasn’t claimed R&D tax relief before, or hasn’t claimed relief in the last three years, you need to ensure that your company notifies HMRC of its intention to claim the relief at any point between the start of the accounting period and six months after the end of the accounting period.

If your company is not sure if it can make an R&D claim, it is still worthwhile submitting a pre-notification form as the company will not be required by HMRC to submit a claim if it later decides not to pursue a claim or finds that the project does not qualify.