From 8 August 2023, claimants for R&D tax relief or expenditure credits will need to submit an additional information form (AIF) to HMRC. This form complements the existing submission and will enable HMRC to identify fraud and errors more easily.
**Claimants will need to send the AIF before submitting the company’s Corporation Tax Return, otherwise the claim will not be valid and will be rejected by HMRC.**
As well as setting out basic company information and summaries of the types of costs claimed, the AIF itself aims to provide a high level overview of projects incurring the most significant expenditure.
There are seven key questions that need to be answered:
- What is the main field of science or technology?
- What was the baseline level of science or technology that the company planned to advance? Here, HMRC are looking to establish the current industry ‘state-of-the art’ and use this as the benchmark with which to compare your technological advance. If you’re trying to improve an existing process or technology, what were the existing features and capabilities? If you’re trying to develop new knowledge in a particular area of science or technology, then what was known at the outset?
- What advance in that scientific or technological knowledge did the company aim to achieve?
- What were the scientific or technological uncertainties that the company faced? This section should outline the limiting factor that is stopping the company from achieving the sought-for technological advance. Its should also explain why the company did not know if it the project goals were possible or could not readily deduce how achieve them (a problem is not an uncertainty if the solution is already documented, or if it can be resolved in a discussion with peers).
- How did your project seek to overcome these uncertainties?
- Which tax relief is your business claiming for and what is the amount?
- What is the amount of qualifying expenditure on Qualifying Indirect Activities? Qualifying costs will now need to separately identify the amount of staffing costs relating to non ‘hands-on’ R&D work such as project administration, project financials and HR work.
While these questions should already be familiar from any technical discussions held with advisors during the claim preparation process, the new highly structured approach requires succinct explanations and so this will certainly influence the nature of those conversations going forward.
As a result, it’s worth having a think about your projects in the context of the points raised above.