Three Reasons to do your R&D claim now
With so many changes to the R&D tax relief rules happening recently or scheduled to take place in the next 12 months, it might seem like a good idea to go slow on your R&D claim for the year to 31 December 2022 or 31 March 2023: why not let the dust settle and then put in your claim? After all, the final deadline for claims is two years after the end of your accounting period.
When there is doubt and uncertainty over new rules, this is perhaps a natural response. But given where we are now, I would argue that a delay could be both expensive and counterproductive.
Cashflow
Delaying your R&D claim certainly won’t help your cashflow for this year. R&D relief gives valuable financial support for your research function, so in a challenging economic climate, claiming that support as early as possible is just good business sense.
Known processes and arrangements
HMRC’s new R&D claims process does not take effect until 1 August 2023 so making your annual R&D claim before that date means you are dealing with a known (and hopefully) familiar process of gathering data for you or your adviser to complete the claim. Not only will this be easier, it may well help to make the handling of your claim quicker: the current system may not be perfect in HMRC’s eyes, but it works.
Like any organisation dealing with a new process, HMRC’s R&D team may well take time to get used to their new approach and it is quite possible that this may, at least initially, slow down the process of dealing with your claim. So getting your claim in during July could avoid some timing problems.
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Prepare now to make next year’s claim easier
Clearing the decks by doing your 2022 claim now will give you more time to prepare for next year’s claim which may be more challenging.
The Additional Information form that HMRC requires from 1 August onwards requires businesses to collect claims and cost data at a much more granular level, under some different data headings and on a project-by-project basis. The sooner you start collecting the right data for your 2023 claim the better. It is always easier to put the right systems in place to collect data contemporaneously than it is to look back at the past 12 months and unpick company wide records to identify discreet project costs. For SMEs, the rate of tax relief you get in future will be lower, so if you have to put in more analytical effort to claim it, that would be a double hit.
We have been helping clients analyse the gap in their data gathering process between where they need to be for claims after 1 August 2023 and where they are now. For some businesses there will be a significant gap in how they are set up to collect records and, particularly for large groups, changing the direction and embedded processes of their accounting records super-tanker may take a while.
You can read about how the new claim rules will work here. In the meantime, if you need some help or advice on making your 2022 claim, please don’t hesitate to get in touch.