Research & Development Tax Credits – HMRC’s latest move of the ‘goal-posts’

October 10, 2022

BSc CTA, Tax Partner
East London


Research & Development Tax Credits – HMRC’s latest move of the ‘goal-posts’

HMRC released their latest amendments to the Research & Development Tax Credits scheme in July, via the draft Finance Bill 2022-23. These changes affect both the Small or Medium Enterprise (SME) and Research & Development Expenditure Credit (RDEC) scheme.

Many of these amendments were brought to light within the Autumn 2021 budget, including:

So, what has brought about these new changes, what are they and when are they taking effect?

The level of erroneous R&D claims

The latest figures for HMRC, courtesy of the National Audit Office, estimate that the level of erroneous claims within R&D tax reliefs across both schemes (SME & RDEC) for 2021-22 is a staggering £469m, up almost 40% on the previous year’s (2020-21) estimated figure of £336m.

It is important to note that these figures include both fraudulent claims and genuine errors, which could have arisen from misinterpretation of the guidance or accidental calculation mishaps for example.

New R&D submission requirements 2022

In an attempt to tackle fraudulent claims, HMRC has announced the submission of an R&D claim will be required to be made digitally, unless the claimant company is exempt from digital filing.

With this digital submission, companies will also be required to include the details of the agent advising on the claim as well as a named senior officer within the company responsible for the claim. The regulations for this are yet to be published.

Any company that intends to claim R&D tax credits from 1 April 2023 must inform HMRC of their intention to claim within six months of the end of the relevant accounting period. However, this will not apply to companies who have claimed within any of their preceding three accounting periods.

Subcontractor & Externally Provided Workers (EPW)

Currently, companies claiming under either the SME or RDEC scheme can claim their eligible subcontractor costs regardless of where the activities are performed.

The new regulations state that, for accounting periods starting on or after 1 April 2023, subcontractor and externally provided worker (EPW) costs will be limited to activities undertaken within the UK only. There are, however, a few exceptions under the circumstances where the work had to be undertaken outside of the UK for geographical or regulatory purposes.

Changes in R&D group relief

Under present regulations, should a company exceed the SME qualification bracket and fall within the ‘large’ company bracket, the company can continue to claim under the SME scheme for one further year, however, the other group members are not entitled to the additional year.

HMRC have announced that this additional year of SME status can now benefit all members of the group for claims from April 2023.

Here to help

With the tighter controls and scrutiny for R&D claims being implemented from 1 April 2023, there’s never been a better time to ensure your R&D claim is being prepared and calculated correctly.

Barnes Roffe are here to help, our in-house R&D Tax Credit experts will be able to advise and assist you in ensuring your R&D claim is as robust as possible, so feel free to contact us to ensure your claim stands up to the ever-tightening scrutiny of HMRC.