What do innovative businesses need to know about claim notifications?

For innovative businesses with accounting periods beginning on or after 1 April 2023, it is now mandatory to submit a claim notification ahead of an R&D tax relief claim for first time claimants and those who haven’t submitted a claim within the last 3 years.

This came alongside a whole suite of measures to aid the ongoing battle against R&D error and fraud, with this rule aiming to prevent last minute speculative claims.

And although the government is exceeding their goal in raising investment in R&D to 2.4% of UK GPD by 2027, the number of first-time submissions are falling year-on-year. Sara Kelly explains what the claim notification requirement means for claimants going forward, and why new and returning claimants shouldn’t miss out on the valuable relief.

Here’s everything you need to know about the new notification period and why the new compliance measures shouldn’t mean your business has to miss out.

What does it mean in practice?

The claim notification requirement creates a need for businesses to identify their R&D activity earlier. By having to notify HMRC of their intention to claim, new and returning claimants (those who haven’t submitted a claim within the past three years) will be required to delve into their R&D activities as they are happening rather than retrospectively.

If you’re claiming R&D tax relief, or intending to going forward, you will need to review and understand your eligibility sooner rather than later.

What do claimants need to do?

New claimants and those who have not submitted a recent claim should review their R&D activity yearly with a trusted advisor.

Businesses should do this to avoid missing out on valuable tax relief they qualify for, as well as ensuring their claim is compliant amongst ever-changing regulations. A habitual review of R&D activity ahead of a pre-claim notification will bring R&D into mainstream compliance alongside end of year accounts and tax submissions.

More onus, therefore, will be on business owners to ensure they understand what they are submitting, with the help of an advisor. Businesses will need to understand how their activities qualify for R&D, their expenditure and the scheme they fall under- whether that be SME, RDEC or the future merged scheme. Understanding what that means financially for the business is also hugely important.

It’s worth noting that there is no harm in submitting a claim notice but then deciding not to go ahead. This won’t affect future claims in any way.

Timelines & claim notification windows

From the first day of your accounting period, you will have up to 6 months after the accounting period ends to make the notification.

This means that if your accounting period (in which you incur R&D costs) runs from 1 January 2024 to 31 December 2024, then a notification should be submitted between 1st January 2024 and 30 June 2025.

If a company has a long period of accounts- lasting for more than 12 months- this is usually split into two accounting periods for corporation tax purposes. If this is the case, only a single form needs to be submitted.

Why changes shouldn’t be a barrier for your business

With the help of your advisor, reviewing your R&D activity at the end of your accounting period should be as straightforward as your other annual compliance duties.

Claimants should consult a qualified tax professional who specialises in R&D to ensure each element of the process is understood, alongside any changing legislation which may affect the claim. Having the correct information and right support on hand is crucial to breaking the appearance of any initial barrier.

Guiding you through the process

The introduction of the claim notification requirement shouldn’t be seen as a barrier, but an opportunity for businesses to receive the best possible advice at an earlier stage. In doing so, more businesses will adopt best practice, which will inevitably make for an effective claims process.

With the right support on hand, claimants shouldn’t miss out on this invaluable relief. But compliance must be at the heart of every claim. Increased compliance around the R&D process is welcomed, and remains a focal point for our team.

Our highly qualified team of tax advisors will ensure you keep up to date with the latest legislative changes, as well as any scheme changes you may fall into as a result of your business activity throughout the year.