ICAEW.com works better with JavaScript enabled.

TAX NEWS

HMRC guidance on handling R&D tax relief claims

Article

Published: 15 Aug 2023 Update History

New guidance in HMRC’s corporate intangibles research and development (CIRD) manual focuses on procedures for companies with customer relationship managers but includes some points of wider interest that would also apply to smaller companies.

The new guidance in HMRC’s corporate intangibles research and development (CIRD) manual can be found as an update to CIRD80370

From 8 August 2023, all companies making a claim under the SME scheme or RDEC are required to complete an Additional Information form. This form must be provided before the Company Tax Return is submitted. 

HMRC states that: “There is no pre-determined expectation of the amount of information required to be provided for any individual project when completing the Additional Information form. What you provide should be sufficient to explain to HMRC why the project qualifies for R&D relief/RDEC. Where we do have questions about your projects, we can write to you for further information.”

Where the company has a Customer Compliance Manager (CCM), the two may agree the amount of detail to be included, if this takes account of HMRC’s knowledge of a group’s R&D activities and claim preparation process.

Helpfully, if a project extends across multiple claim periods, companies can reuse the text box entries from previous Additional Information forms, updated where necessary if the project uncertainties or activities have changed.

In addition, where a company makes a claim that covers an excess of ten projects, guidance is included as to what might be acceptable disclosure in situations where the top 10 projects by qualifying expenditure is not a fair representation of the R&D done.

Submitting R&D reports

HMRC is keen to stress that companies and agents should continue to submit R&D reports as they often contain additional information such as details of competent professional experience and R&D claim methodology. Good practice includes:

  • Ensuring the advance and uncertainties are described specifically and sufficiently, not simply the commercial aim of the project.
  • Explaining the methodology used to calculate the claim.
  • Explaining and detailing the background records and systems used to identify qualifying activities and costs, eg information about the use of project documents, timesheets/time recording systems, estimates etc.
  • Showing expenditure and eligibility breakdowns by project.
  • Showing how the identified expenditure/R&D percentage(s) applied to individual(s) links to the qualifying activities which are described.

Use of sampling

The guidance also includes some helpful guidance on sampling where the extent of the work involved in preparing a fully detailed claim would be disproportionate compared to the benefit received. Where there are a significant number of projects and records, the company or agent should agree a suitable sampling with an R&D specialist in advance of the claim.

The process involved in arriving at the sample must be transparent, open and utilises the information that is held and available from the company in a way that gives an answer consistent with the work and cost incurred by it.

As a guide, where like projects are grouped together, a minimum of 15 such projects will need to be sampled as any fewer would be too small a sample to provide a reliable result. 

The Tax Faculty

ICAEW's Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

More support on tax

ICAEW's Tax Faculty provides technical guidance and practical support on tax practice and policy. You can sign up to the Tax Faculty's free enewsletter (TAXwire) which provides weekly updates on developments in tax.

Sign up for TAXwireJoin the Tax Faculty

More from the Tax Faculty

Latest news
Making tax digital image
TAXwire

Stay up to date with the latest developments in tax by signing up to the Tax Faculty's weekly e-newsletter

Practical guidance
Cover
TAXline

Comprehensive support for Tax practitioners each month from the Tax Faculty and expert contributors.

Technical support
Tax Faculty image
Webinars

Expert advice from the Tax Faculty's technical managers on all the developments in tax policy and practice.

Open AddCPD icon

Add Verified CPD Activity

Introducing AddCPD, a new way to record your CPD activities!

Log in to start using the AddCPD tool. Available only to ICAEW members.

Add this page to your CPD activity

Step 1 of 3
Download recorded
Download not recorded

Please download the related document if you wish to add this activity to your record

What time are you claiming for this activity?
Mandatory fields

Add this page to your CPD activity

Step 2 of 3
Mandatory field

Add activity to my record

Step 3 of 3
Mandatory field

Activity added

An error has occurred
Please try again

If the problem persists please contact our helpline on +44 (0)1908 248 250