Unpacking HMRC’s Updated Regulation on R&D Tax Claims.

Navigating the New Terrain – pure maths now included!

In a bid to encourage Research and Development (R&D) ventures across the UK, HMRC has rolled out a fresh wave of regulations concerning R&D tax claims. If your business is involved in innovation, you may well be eligible for substantial financial relief. Having a thorough grasp of the updated R&D tax relief framework is indispensable to ensuring your financial forecasts remain on an even keel.

Since 8 August 2023, the landscape of filing for R&D tax relief has undergone a significant transformation. All businesses are now required to submit an Additional Information form, providing a more detailed insight into their R&D activities.

Part of the spotlight is on pure mathematics, which is now recognised as a legitimate aspect of R&D from the point of view of tax claim purposes.

The updated guidance – titled Guidelines on the Meaning of Research and Development for Tax Purposes, unveiled on 7 March 2023 – has, for the first time, embraced pure mathematics. Guideline 15B states: ‘Mathematical techniques are frequently used in science. From April 2023, mathematical advances in themselves are treated as science for the purposes of these Guidelines, whether or not they are advances in representing the nature and behaviour of the physical and material universe.’

The modifications will be in force for corporation tax for accounting cycles starting after 31 March 2023 and for income tax and capital gains tax beginning the fiscal year 2023/24.

The purpose of the changes is clear – to hoist the UK’s R&D investment to a commendable 2.4% of the GDP by 2027. R&D tax relief is a cornerstone in diminishing the financial burden of innovation for UK enterprises. With these fresh changes, the government is eyeing a surge in “additionality” – the additional R&D expenditure by companies making use of the relief. Moreover, the overhauls in the claim process are aimed at ironing out discrepancies and curbing any misappropriation of the R&D tax relief mechanism.

The government is inching closer to merging the existing SME scheme with the R&D Expenditure Credit (RDEC) rules into a single unified regime. This will potentially come into effect for costs incurred on or after 1 April 2024. This unification, moulded on the current RDEC template, aims at simplifying the process and ensuring that the relief is more accessible to a wider range of businesses.

As the curtains draw on the old R&D tax claim regulations, ushering in a new era of redefined and streamlined processes, it’s vital to have your finger on the pulse of these changes. Adapting to the new regulations not only places your business in a favourable position to maximise the R&D tax relief. It also aligns your innovation work with the UK’s broader economic blueprint. The journey through the maze of HMRC’s updated regulations might appear daunting, but with a clear understanding and proactive engagement, your business can continue to thrive in the heart of innovation.

Here at Dux Advisory, making the most of tax benefits comes as second nature. We’ll give you all the guidance and support you need to maximise your R&D claim entitlement.

Our tax team are a group of personable, plain-speaking professionals who translate intricate tax legislation into easy to understand language – so get in touch today if you’d like to discuss things further – Contact us now.