You will have heard that soon, in some circumstances, HMRC will need advanced notice of your intention to claim R&D tax relief. We’ve been receiving a lot of queries from our clients and our partner accountants asking for clarification of this requirement, not least because the guidance provided is not particularly clear and appears to contradict the draft legislation. We asked HMRC to clarify and hope that we can explain further here.
Important update | 24 July 2023
Since this was posted, HMRC have updated all guidance to reflect that the new requirement for an Additional Information form will now be effective from the 8 August 2023, not the 1 August 2023.
What does the Finance Bill 2023 say about the advanced notification requirement for R&D tax relief claims?
In the draft legislation of the Finance Bill 2023, it is worded that any claimant who has claimed in any of the previous 3x years, ending with the last day of the claim notification period, will not be required to submit an advanced notification form when submitting a claim for the fourth accounting period. This was also specifically referenced in the policy paper published 15 March 2023.
However, in more recent guidance published in April, and most recently updated 19 April 2023, this now reads that if the previous claim made was submitted after the claim notification period or without an advance notification being made, then the subsequent claim will need to be notified – even if the claimant had claimed in all 3 prior periods.
We suspected that this could be incorrect so asked HMRC for clarity as we could see that this would have a far wider knock on effect on how the legislation is intended to be interpreted.
Clarification of the advanced notification requirement from HMRC
Is it correct that any company that has made a claim in any of the earlier 3x accounting periods does not need to submit an advance notification form for their fourth accounting period in which they intend to make a claim?
HMRC confirm that in In general, that is right. BUT draw attention to the fact that it’s three years before the last day of the claim notification period (not from the end of the accounting period). Notification must have actually been made by that date (e.g. an intention to make a claim for an earlier period which will ‘frank’ that later period but is not made within the six months).
A worked example of the advance notification requirement
First step – identify your claim notification window
Suppose a company has an accounting period that runs from 1 April 2025 to 31 March 2026. The company can notify HMRC of its intention to claim R&D tax relief for this accounting period during the claim notification window – this starts on the first day of the accounting period, 1 April 2025, and ends six months after the end of the accounting period, 30 September 2026.
Second step – check if the three year exemption applies:
The company does not have to submit a claim notification form for the current accounting period if the company made an R&D tax relief claim for an earlier period at any point during the three years that ends with the last date of the claim notification window i.e. at any point between 1 October 2023 – 30 September 2026.
Third step – if the three year exemption does not apply check whether a relevant claim has been made after the last date of the claim notification window:
If the company made an R&D tax relief claim for an earlier period but they submitted that claim after the last date of the claim notification period for the current year of 30 September 2026 (i.e. after the normal claim deadline but before the CT return amendment deadline), then the company will have to submit a claim notification for the current accounting period to claim R&D tax relief.
Fourth step – check if the long period of account exemption applies:
The exception to the previous step would be where the earlier and current year accounting periods form one long period of account and a claim notification has been received which covers the whole period of account.
When does the Advance Notification form become a requirement?
For accounting periods starting on or after 1 April 2023, the Advance Notification form will become a statutory requirement for all first time claimants and any company that falls outside of the check process, above.
Is the Advance Notification form different from the Additional Information form?
Yes – The Additional Information form will become a statutory requirement for all R&D claims submitted to HMRC on or after 1 August 2023, regardless of how many previous claims the company has made or when those claims were made.
If I submit an Advance Notification form will I still need to submit an Additional Information form?
Yes. If an advanced information form was required to be submitted during the notification window, when the actual claim is subsequently filed with HMRC the Additional Information form must also have been submitted on or before the filing of the tax return with the R&D claim. After 1 August 2023, if a claim is submitted without the Additional Information form HMRC will write to you to inform you that they have removed your claim for R&D relief from your tax return.
What to do if you aren’t sure if you are exempt from an advanced notification requirement
It remains complicated and I don’t think we were the only firms to seek clarity from HMRC. The guidance has been tweaked, and they are still being updated so we can hope that will help further.
However, if in doubt speak to your accountant or to your R&D tax specialist to make sure that you don’t miss out on this important tax relief due to an admin oversight.
All GovGrant clients can be confident that this is in hand for them and we will raise any specific points during the normal claim process.