Understanding the Additional Information form for R&D claims
Background
Key changes to the R&D tax relief claim submission process were implemented by HMRC on 8 August 2023. Whilst previously there was no mandatory requirement to submit supporting evidence when making a R&D claim, all claims submitted on or after 8 August 2023 must be accompanied by an Additional Information Form. This is one of the measures implemented by HMRC in an attempt to reduce fraud and error in R&D claims.
So, what is the change and what does it mean for claimants?
What is the new requirement and when is it effective?
All R&D claims submitted from 8 August 2023 onwards, whether under the SME regime or RDEC regime and for any accounting period, will require submission of the new Additional Information form to HMRC BEFORE the company’s corporation tax return and supporting computation is submitted. This is a digital form submitted by the company, its accountants or a business supporting the company with its R&D claim (an agent), through the Government Gateway.
Since 8 August 2023, claims submitted in corporation tax returns but without a corresponding Additional Information form will be rejected by HMRC. Early indication from HMRC suggests that 50% of R&D claims made in August were rejected for this reason.
What is the purpose of the form?
The Additional Information form is now an integral part of the R&D tax relief application process, requiring businesses to provide a comprehensive description of their R&D projects and demonstrate how they meet the criteria for relief, as well as provide detailed project-level information on the qualifying expenditure included in the claims split between core R&D activity and qualifying indirect activity. This information will allow HMRC to enhance their compliance activities and ensure that this generous relief is only accessed by valid claimants in respect of genuine R&D activity.
What is in the form?
The following information will be required:
- Registered name
- UTR
- VAT registration number
- Employer’s PAYE reference
- Business Type, SIC code
- Company Officer responsible: name, role, telephone number, email address
- Agent: name, reference number, business or trading name, address, telephone number, email address, role
- Accounting period start and end date
- Period of account start and end date
- RDEC qualifying expenditure
- SME qualifying expenditure
- Whether the R&D activity is in the UK
- Whether the s1058D (exception to the tax credit cap) applies (SME only) and if so, reasons
- Number of R&D projects
- Detailed project descriptions (specific requirements on what descriptions are needed)
- The number of externally provided workers involved in the projects
- The Employer’s reference for all externally provided workers
- Detailed breakdown of expenditure by project, split between core R&D and “qualifying indirect activities”
HMRC further specify the number of project narratives required:
- for 1 to 3 projects, you need to describe all the projects you’re claiming for that cover 100% of the qualifying expenditure
- for 4 to 10 projects, you need to describe those projects that account for at least 50% of the total expenditure, with a minimum of three projects described
- for 11 to 100 (or more) projects, you need to describe those projects that account for at least 50% of the total expenditure, with a minimum of three projects described — if the qualifying expenditure is split across multiple smaller projects, describe the 10 largest
Preparing for the new requirement
The quality and focus of the information in relation to the projects and expenditure included in the Additional Information form is key to ensuring a successful claim. It is important to:
- Provide sufficient detail: be thorough and concise in your responses. Include specific technical information, project timelines, and any unique challenges encountered.
- Use clear and precise language: avoid technical jargon and acronyms that may not be familiar to HMRC. Use plain language to explain complex concepts, ensuring that anyone reading the form can understand the nature and significance of your R&D project.
- Support claims with evidence: explain your statements with relevant evidence or information, supporting documentation can be submitted in addition to the form and we would suggest claimants take advantage of this, if relevant, to add credibility and provide the detail HMRC may need to approve the claim.
- Seek professional support: if you’re unsure about any aspect of the Additional Information form or the R&D tax relief application process, consider consulting with R&D tax specialists. Expertise can help you navigate the complexities and ensure your claim is valid and supportable.
Conclusion
The Additional Information form is now a central component of the R&D tax relief application process and there is no discretion as to whether this form is completed. All claimants need to fully understand what is required and prepare comprehensive claim documentation to ensure that their claims are approved in a timely manner.
Further information published by HMRC can be found here:
