Changes centralise around the requirement to pre-notify HMRC of the intent to claim, claiming costs for overseas contractors who carry out R&D activity, the inclusion of cloud computing, and the new rates of relief available. This article details these changes.
The first change is the addition of the CNF to the R&D claim process. This is one of the biggest process changes companies need to know about and is the requirement to pre-notify HMRC of a company’s intention to make an R&D claim, via a Claim Notification Form (CNF).
The CNF is an important change in legislation affecting all UK-based companies. All businesses must now submit a Claim Notification in advance of claiming, if they wish to make an R&D tax claim as a ‘heads up’ to HMRC. The CNF includes basic information, the person responsible, and a summary of the high-level R&D projects a business plans to claim for.
For claims attributed to accounting periods beginning on or after 1 April 2023, claimants are required to notify HMRC within six months of their accounting period end, if any of the points below apply:
Failing to meet the forward notification requirement could affect a company’s eligibility to claim and mean that the claim could be disallowed in full. If you have any questions about CNF, please contact our team with any questions relating to your specific circumstances.
The scheme has undergone recent changes to subcontracting costs. For companies whose accounting periods begin on or after 1stApril 2024, subcontractors/EPWs who are based overseas are not eligible under the R&D tax credit scheme. However, there are caveats to this rule, which is why seeking expert advice in important to ensure that no costs are missed.
In circumstances whereby regulatory restraints exist, overseas subcontractor costs can be allowable under the R&D scheme. The exception criteria which would need to be met for overseas subcontractors to be included are:
1. The necessary conditions for that R&D cannot be met in the UK
2. They are met in the overseas location
3. It would be wholly unreasonable to replicate them in the UK
This is particularly pertinent for Fintech’s, as due to FCA regulations or localised equivalent, (respective to each country), developers in each location bring different skillsets which may be necessary to fulfil the FCA (or equivalent) requirements. This means that software developers from other countries, who are knowledgable on and have the skillset needed to enact local legislation may be required during the project.
A welcome addition for FinTech businesses is changes to the scheme related to cloud computing. Costs attributed to cloud computing, for accounting periods beginning on or after 1st April 2023, are now eligible under the R&D scheme.
Depending on the R&D tax relief scheme in which you claim under, please speak with an advisor to confirm this, different rates of relief are available. These rates are outlined in the table below:
A new scheme called ERIS was introduced at the same time as the merged scheme, for accounting periods beginning on or after April2024. This means that the first full accounting periods impacted by ERIS will be companies with a March 2025 year end (or prior if shortened period of accounts).
The merged scheme is a combination of RDEC and the previously traditional SME scheme; all companies no matter size would claim under this. However, HMRC recognised that there are loss-making companies that are doing high-intensity R&D projects would need a higher rate of relief to continue to innovate effectively. Claiming under the ERIS scheme facilitates an additional relief for claiming companies. This means that businesses who qualify for ERIS are able to receive more from the R&D tax relief than those claiming under the merged scheme.
To qualify for ERIS, companies must meet a certain threshold. To claim under ERIS, companies must:
Due to the schemes recent changes, we advise working with a specialist R&D provider to navigate claiming. We encourage businesses within the Fintech sector to have a conversation around R&D tax relief and if this is suitable for your business. At RCK Partners, we would be more than happy to facilitate this conversation.
RCK’s R&D Consultants are specialists not generalists. At RCK, we hire directly from industry so the consultants who work on R&D claims, have a vocational understanding of the topics in which they prepare claims for and can understand the technical nuances of each R&D project. Their backgrounds are varied from PhD-level scientists to engineers.
RCK offer a complimentary optimisation review of existing R&D tax credit claims. Due to RCK’s industry leading technical team, backed by ex-HMRC inspectors we are typically able to identify a greater range of R&D projects and associated costs than accountants. If we don’t identify any additional saving, no fee will be charged.
Each claim we submit to HMRC is reviewed by our independent, in-house compliance and review team. This team is comprised of former HMRC inspectors, lawyers, and accountants.
Former Chancellor of the Exchequer, Lord Philip Hammond and Lord Iain McNicol, former General Secretary of the Labour party, sit on RCK’s board of directors and advise on corporate strategy, the macroeconomic environment, political policy and the tax landscape.
If you have any questions or would like to learn more about the scheme please read our R&D tax credit webpage, or get in touch.
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