On April 1, 2023, many of these alterations will take effect. However, what influence will they have on the operations, customers, and requests that you handle?
The amount of tax deduction for small and medium-sized enterprises has been lowered from 130% to 86%, and the tax credit has been decreased from 14.5% to 10%.
The tax credit for research and development-intensive small and medium-sized enterprises that are not profitable will remain at 14.5%. In order to be eligible, at least 40% of the total expenditure must be devoted to R&D.
Businesses taking advantage of the RDEC scheme have seen their tax credit rate rise from 13% to 20%.
If the period during which the claim starts before and concludes after April 1st, 2023, you will have to divide the expenses in order to use the suitable rates for each section of the period.
You may be able to qualify for an enhanced tax credit rate is recommended, though the necessary legislation has yet to be established. For now, this rate will be initially set at 10%, but it can be amended afterwards to receive the additional tax credit.
Rather than making the claim right away, you can opt to wait. It is uncertain when the legislation will become official, so you and your customer should decide which option would be more advantageous for them.
Submitting documents electronically and extra details
Beginning from 1 August 2023, HMRC has mandated that all claims must be put forward utilising the new digital forms they are in the process of creating, which require additional details to be submitted. Exemptions from this rule will be put in place for certain companies that are not expected to comply with Making Tax Digital.
Submitting a claim before the 1st of August can be done in the same manner as usual, with no extra paperwork required.
Making a thorough report while filing an R&D tax relief claim should make it effortless to fill out the digital forms since all the necessary facts can be taken from the report.
It is uncertain what consequence digital submissions and extra data will have on processing times, so it is wise to be aware that the procedure could take more time than normal.
Within 6 months of the conclusion of their claim period, new or infrequent claimants need to file a prenotification for any claim they make. People who have made claims in the last three years, however, are not required to do this.
If you put in a claim recently and you continue to do so on a regular basis, the impact of this alteration should be minor. Even if they are a first-time claimant, they can still submit claims for past occasions which began prior to April 1, 2023 without any prior warning.
Workers hired from abroad and those provided from external sources can be classified as subcontractors located overseas.
At the start, the Government declared that the SME scheme will be altered to only provide relief for subcontractors and EPWs based in the UK. Numerous companies pointed out that since R&D contracts can take a while to complete, it can be hard to discover similar subcontractors and EPWs within the UK. Therefore, this would seriously reduce the worth of the relief.
The Government has chosen to defer this modification until April 2024. It appears probable, due to their goal of uniting the two R&D schemes, that there will be no need for alterations at that time.
It is expected that there will be a great revamping of the R&D tax relief regulations in the near future. The Government has inquired if they should establish a united R&D system, similar to the present RDEC regulations. They plan to provide a draft of the new law in the summer of 2023, with the goal of executing the new scheme on April 1st of 2024.
It is yet to be determined if they will be able to stay on the stringent timeline!
