How HMRC changes are transforming R&D Tax Relief

How HMRC changes are transforming R&D Tax Relief: What does it mean for your business?

Fuelling Innovation with R&D Tax Relief

Research and Development (R&D) tax relief has long been a critical source of financial support for businesses driving innovation in science and technology. This incentive has empowered companies—especially SMEs—to push boundaries, develop new technologies, and stay competitive. However, recent changes by HMRC are reshaping the landscape, introducing new compliance measures that impact how businesses claim tax relief.

Key Changes to R&D Tax Relief: What You Need to Know

Unfortunately, recent years have seen a surge in R&D claims with numerous “specialist” R&D claim firms springing up and, in some cases, exaggerating the amount that could be claimed as genuine R&D. Therefore, since 2021, to crack down on fraud and enhance transparency, HMRC has rolled out stricter rules. These include:

• SME claim cap – R&D tax credits are now tied to a company’s PAYE and NIC liabilities, limiting the tax relief available.
• Named officer requirement – A designated senior officer must oversee each claim, ensuring accountability and full disclosure of any tax advisers involved.
• Advance notification rule – Companies must notify HMRC of their intent to claim within six months after their accounting period ends.
• Mandatory digital filing – All claims must be submitted online with comprehensive supporting documentation.
• Elimination of nominee payments – R&D tax credits can only be paid directly to the claiming company, not third-party nominees.

The Business Impact: A Tougher Road to Relief

These shifts have made the claims process more complex, resulting in a noticeable decline in applications. According to HMRC’s R&D statistics and report (released Winter 2024):

• R&D tax relief claims dropped from 83,240 in 2021/22 to 65,690 in 2022/23.
• SME claims were hit hardest, falling by 23% from 71,905 to 55,325.
• The HMRC enquiry rate surged from 10% to 17% within a year, with average enquiry resolution times now exceeding eight months.

These figures obviously raise critical questions: Are fewer businesses engaging in R&D, or is the increasingly complex process discouraging genuine claims? For SMEs relying on tax relief to fund innovation, these new hurdles could slow progress and growth.

Maximising Your R&D Tax Relief in a Changing Landscape

While HMRC’s goal of preventing fraud is valid, it’s essential that eligible businesses continue to access the support they deserve. R&D tax relief should be a driver of innovation, not an administrative roadblock.

If your company is engaged in qualifying R&D activities, our team can help you navigate the new claims process with ease. We ensure full compliance while optimising your claim, so you don’t miss out on valuable relief.

Next Steps

Get in touch today to see how we can help you in claiming relief to allow your business to continue innovating and thriving.