Claim notification- What you need to know.

In 2023 legislation was introduced which in certain circumstances made it necessary to notify HMRC of an intention to submit an R&D claim in advance of a claim. The official detail can be found through the link below, and it is important to reference this yourself and not rely on commentary on it for advice. The HMRC advice also includes the link to the actual form.

https://www.gov.uk/guidance/tell-hmrc-that-youre-planning-to-claim-research-and-development-rd-tax-relief

Key takeaways:

1. This applies to accounting periods starting from 1st April 2023. This means, as most periods are a year long, that the requirement is substantively going to kick in this year (2024) for periods that started on 1st April 2023 and ended 31st March 2024. It will start to be a common consideration from then on. While the change is old news it will be practically new this year due to the backward looking nature of claims and the fact that accounts are finalised and tax returns filed after period ends. The only circumstance where the requirement might kick in sooner would be if a period of account was shortened to less than a year, e.g. it started on or after 1st April 2023 and ends sooner than a year.
2. A new concept, the claim notification period has been created. This is the period from the start of an accounting period, starting from 1st April 2023 onwards, to the end of the accounting period plus 6 months. So in regard to a company with a 31st March 2023 year end, if it had claimed by today (17th Jan 2024) it would not need to notify a claim for its 31at March 2024 year end, as a claim was filed in the 3 years preceding the end of the notification period, this being the period to 30th September 2024 (for its 31st March 2024 accounting year end). This is important because if the company has not filed a tax return with an R&D claim in the 3 years preceding the end of the notification period then the company must make a claim notification, in this case for its 31st March 2024 claim year (by submitting the form in the link above). But if the company had never claimed before, or had filed a claim in December 2019 for a March 2019 year end then it would need to notify, unless it filed its March 2024 claim before the end of September 2024. Filing the claim in the notification period makes it unnecessary to notify
3. Are there any catchy situations? One “oddity” is that if a company has a March 2023 and March 2024 year end available to file but misses the notification period for 2024 (e.g has not notified by 30th September 2024) then the 2024 claim year is lost but as the old rules apply to the March 2023 year a company could still claim that year. The deadline to claim under the old rules was the 2 years from the accounting period end. So in this case it would be the end of March 2025. But filing that claim does not bring 2024 back in time due to the way the notification period and rules are described. It is when the claim is made that matters not the fact a claim was eventually made for the preceding accounting period.

Having seen some HMRC software problems around the other big 2023 reform the additional information form and also as HMRC have reported a significant level of error around the reform I have given some thought about the best approach to avoiding any delays or worse still loss of claim years around the claim notification requirement. I will not make the obvious point of filing the claim notification if required in time! But that is key.

1. If possible file within 6 months of your accounting period end. This will depend on having accounts ready which can be an issue especially for audited companies. But it does take the claim notification requirement out of play. If a company is due a tax credit it also makes sense in cashflow terms to claim as soon as possible.
2. BUT the HMRC reports around the additional information form requirement suggest a lot of claims are not being filed correctly. So my suggestion is if the company is not exempt from claim notification that even if it is filing a return within the 6 month window they should also file a claim notification form at the same time the claim additional information form is being filed. The information required is similar and you can use the additional information form content for the claim notification form. Doing this protects a claimant from the potential situation where a claim is filed incorrectly and not accepted then the deadline passes. What HMRC would do in that situation is unknown but it is best not to start to have to write letters to clear that up as at best it is a slow process. Filing the claim notification gives you 18 months of breathing room to file correctly.
3. Exemption. If you are going to rely on that to file later than 6 months from the period end do make sure it is clear cut. Company's may not have records of when past R&D claims were filed, exact dates, and they often change accountants. So unless it is absolutely clear that a company meets the previously filed claim requirement, if in time, and take a safety first approach by filing a notification.
4. Do not run up to any claim deadlines, claim as soon as possible. A school of thought and way of working exists that if you have a deadline you wait until its approach to do the work. Personally, I have never liked this. Given the general issues around R&D claim compliance and reform the best advice is to always file early. If anything goes wrong it gives you breathing space and does not push a claim beyond a deadline. Sometimes people say that deadline work is unavoidable. HMRC have little sympathy for those that miss known deadlines, so why risk it?

I always find this new notification rule a hard issue to talk about as to me it is quite a simple proposition and the HMRC page above (Link above) sets it out well with examples. But the more you talk about the more complicated it appears. Claim notification is something that everyone should be careful about and hopefully this blog contains some useful approaches. If you wish to discuss this or anything else R&D related please contact us.

Chris Toms RandDTax Compliance Director.