The world of R&D is forever changing, and with new legislation expected to be announced in the Autumn, we want to keep you regularly updated on news that can affect R&D claims.
HMRC processing times update
HMRC have increased their turnaround times for processing R&D claims from 28 days to 40 days, so we are currently experiencing delays with tax credits being issued. This delay is mainly due to them investigating a larger proportion of claims to try and tackle the rise in fraudulent submissions.
We want to avoid delays as much as possible, so it's important we submit your information as soon as you can get it over to us. Once we have received the information from you, we will submit it to HMRC and chase it on your behalf to ensure they prioritise your claim.
Changes to tax credit
For the accounting periods starting on or after 1 April 2021, HMRC has introduced a cap on tax credit. The maximum they will pay out is now £20,000 plus three times your total PAYE/National Insurance bill for that accounting period.
The companies that will be affected by this change the most are those who rely heavily on subcontractors, rather than employees, to carry out their R&D activities.
If you are worried about this cap, please give us a call and we can talk about your claim in more detail.
Draft R&D new legislation
On 13th July, I attended an HMRC seminar where it was confirmed they are drafting new legislation for R&D which is likely to be approved in the Autumn Budget. Here is what has been proposed:
From April 2023, for accounting periods beginning on or after 01 April 2023:
Hosting and cloud costs are to be allowed
Subcontractor costs will only be allowable if the subcontractor is based in the UK - to encourage innovation in the UK
HMRC must be notified within 6 months after the year end that an R&D claim will be carried out, unless the company has done a claim in the previous 3 years. This shouldn’t affect you as an existing R&D claimant, but we will let you know as this is formalised.
As a team, we are monitoring any changes to legislation and we will regularly update you on HMRC’s process.
If you are worried about how this will affect you and your R&D claim, please reach out to the team and we can talk this through.
Did you know?
Employer pension contributions are a qualifying expenditure for R&D. As long as the payment is made before your year end, we can include these costs in your financials. Plus, pension contributions for directors are also a particularly tax-efficient way of drawing money from your business.
For example, if you spend 25% of your time on R&D, and make a £10,000 pension contribution in the year, your total corporation tax bill could reduce by up to £2,518!
If you have any questions about R&D or your claim, please give the R&D team a call on 01264 721 670.