Research & development relief guidance under review

HMRC is inviting people to comment on draft guidance relating to the upcoming R&D tax credit relief reforms.

The reforms, expected to be implemented from 1 April 2023, will change how R&D works in practice and set out additional information requirements when applying for the relief.

Anyone wishing to comment can do so until 28 February via the Government website.

Initially announced in the Spring Budget 2021, the Government set out plans to review the R&D system to ensure that the UK remains a competitive location for research.

One of the main focuses of the R&D reforms is on qualifying expenditure in the UK and overseas.

For accounting periods beginning on or after 1 April 2023, expenditure on payments to subcontractors must be either UK-based or meet the overseas qualifying criteria for both SME R&D relief and the R&D expenditure credit.

Any companies wishing to claim R&D on overseas expenditure must ensure that the following three factors apply:

• the conditions necessary for the R&D are not present in the UK
• the correct conditions are present in the location where the work is carried out
• it would be wholly unreasonable to replicate the conditions in the UK.

There are also new reporting requirements, and first-time users of R&D relief will have to submit a claim notification form.

In order to apply, you will have to submit the following information:

• your unique tax reference (UTR) number – the same on your CT600
• contact details of the main R&D leader in the company
• contact details of any involved agent
• an agent reference number (if applicable)
• your accounting period start and end dates for the period where you carried out the R&D work.

The draft legislation for these measures was published for comment on 20 July 2022, and any final legislation will be taken forward in the Finance Bill later this year.

Talk to us about your R&D claims.