From XU Magazine, 
Issue 36

Navigating the changes to R&D

How technology is helping firms adapt to the Additional Information Form

This year has seen significant changes to the UK’s R&D tax relief system, which has forced many firms to rethink their tax services and the support they can deliver in this area.
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Keen to crack down on perceived abuse of this generous tax credit system amongst SMEs, the Government has introduced a tranche of changes that are making the claims process more challenging.

This included a reduction to the deduction rate scheme for SMEs and a cut to the SME credit rate for all but the most R&D-intensive companies (i.e., those with 40 per cent of their expenditure on R&D) in April.

This came alongside the new requirement for new claimants and those who have not made a claim in the last three financial periods to submit pre-notification of their claim to HMRC digitally.

As a result, for those affected, HM Revenue & Customs has to be informed within six months of the end of the period of account to which their claim relates from 1 August.

If that wasn’t enough, HMRC has now brought in the delayed Additional Information Form (AIF), which has further increased the complexity and work involved in preparing successful claims for clients from 8 August.

However, it isn’t all doom and gloom as technology is stepping in to make these processes easier.

What is the Additional Information Form (AIF)?

The AIF emulates the eligibility requirements that exist within the R&D regime and requires claimants to address directly how they meet the required outcomes set out within legislation.

It is broken down into four main sections:

  1. Business details
  2. Contact and agent details
  3. Accounting period
  4. Qualifying expenditure and projects

The first three sections are fairly straightforward, but frustratingly require duplication of information already typically included in a claim.

However, it is the final section where much of the additional work is generated. It requires a claimant, or their agent, to outline:

  • Which schemes the claim is being made through —SME, RDEC, or both
  • Which categories of costs are being claimed for in each scheme
  • How much of the qualifying expenditure is a result of qualifying eligible activities
  • How many eligible R&D projects the claimant incurred costs for during the accounting period
  • Details of any subsets within the claim—Up to a maximum of 10 with the described projects representing at least half of the eligible expenditure
  • The total qualifying expenditure, divided into SME and RDEC figures, for each project

This information submitted via the AIF, must be sent to HMRC ahead of the Corporation Tax return (CT600/CT600L).

Within the return itself, claimants or their agents must also ensure that box 657 is checked to confirm that the AIF has been submitted.

As the entire claim is contingent on this process, client and their agents alike cannot afford to make a mistake or miss a step.

What does it require firms to do?

From 8 August, a claim submitted—regardless of claim dates or when the claim was prepared—must have an AIF attached.

For claimant companies, it will mean providing more information than ever before to HMRC, as we have outlined.

The tax authority has made it clear that claims not accompanied by an AIF will not be valid and will be rejected on the spot.

Of course, many businesses rely on the help of accountants and tax advisers to submit claims for them.

As a result of this change, accounting practices need to update their both claim preparation and submission processes to ensure the correct information is submitted.

In both cases, the AIF creates additional complexity and administration at a time when both businesses and their agents are having to deal with other considerable changes to this tax relief.

These recent changes, combined with the existing administrative requirements of R&D tax credit claims, have made it more challenging for smaller firms to provide a competitive tax service.

Inevitably, some of the smaller businesses that rely on these firms’ services have had to look elsewhere at a greater cost or forgo the tax benefits of R&D tax relief altogether.

How can technology help practices?

WhisperClaims is determined to make this transition as easy as possible for accountants by providing them with a robust and compliant framework for preparing genuine R&D tax relief claims.

In a short period, it has evolved its software with the needs of both HMRC and accountants in mind to create processes that are compatible with the Additional Information Form and provide the necessary prompts to agents.

Its new offering includes:

  • Questions to work out how many project descriptions will be needed for the AIF
  • Gathering project costs that can be outputted in an AIF-compatible format
  • Tailored questions to cover other points HMRC ask for in the AIF, including costs for qualifying indirect activities
  • Updating WhisperClaims’ technical report output to reflect these changes
  • Creating a new output containing just the information that HMRC asks for in the order and format required for the AIF, to enable quick and easy transfer into the form

These features deliver a structured process that not only significantly reduces report and AIF preparation times, but gives users confidence that they will be compliant with HMRC’s rapidly changing requirements.

Alongside this technology, WhisperClaims provides a dedicated Advice Line so that advisers have access to their experts via Live Chat in the app or by email and phone.

WhisperClaims is able to answer any questions about R&D tax relief, including general guidance on the legislation, or support with a specific question about eligibility of a given project or client.

Why leave it there?

To book a demo and find out more about how WhisperClaims can help you

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