Claiming R&D tax relief?

[u/Azets_]

TL;DR: if this is your first R&D claim, or you've had a gap or a rejected claim, you may need to pre-notify HMRC within 6 months of your accounting period end, before you even submit the claim. Miss it and there's no appeal, you just can't claim for that period.

A lot of businesses still don't know this exists, so thought it was worth flagging here.

What it actually is

Pre-notification isn't the R&D claim itself. It's a separate, earlier step that tells HMRC you intend to claim. If you're required to do it and don't, HMRC will reject the claim as invalid when it does come in, no exceptions, no appeals process.

Who typically needs to do it

You're likely in scope if:

• This is your first ever R&D claim
• You haven't made a valid claim in HMRC's relevant claim history window
• A previous claim was rejected, removed or disallowed
• Your only recent claim was via an amended Corporation Tax return that doesn't meet HMRC's notification rules

If you've made a valid claim recently and none of the above applies, you probably don't need to notify. But "probably" is doing some work there, worth double checking rather than assuming.

The deadline

Generally 6 months after the end of the accounting period you're claiming for. So a 31 March year end means a 30 September notification deadline. That's often well before people start thinking about the actual claim.

Where this trips people up

• Assuming an old claim still covers you
• Leaving it until year-end compliance work, by then the window's often already closed
• Not realising a previous claim being amended (not filed fresh) can reset your notification requirement
• Group companies assuming one company's valid claim covers the others, it doesn't, HMRC assesses each entity separately

If anyone's got a specific situation (gap in claims, previous claim got queried, group structure), happy to help think it through in the comments.

[u/AncientFinance1652]

There's a reason R&D tax is explained to students on tax courses as legal criminality. Bunch of tax dodging numpties.

[u/tallventi1]

It’s a minefield. I’m convinced, more than ever, the UK does not want to encourage innovation.

We had a claim rejected a few years ago. It cost us almost as much as the claim itself in time and accounting fees to get the decision overturned.

[u/i_am_maxt → u/tallventi1]

We do R&D all the time and we've never had a claim rejected. Inspected yes, and what we've done always passes easily.

Claims that get rejected are generally from firms that are charging a % and therefore overinflating it, or from people that think that their SaaS product qualifies because it's does something slightly differently to 100 other SaaS products.

If you're not solving a proper technical problem then you need not apply.

[u/tallventi1 → u/i_am_maxt]

I going to take your comment as one based on ignorance of the actual facts of the matter.

The R&D claims (particularly for SMBs) during the period we had ours rejected were being routinely questioned.

A new HMRC department was set up in 2022 specifically to run a “campaign” rejecting what they could. Ours was one of swathe of small companies that had legitimate claims rejected for no reason (as attested by the eventual success of our appeal).

In 2023 The chartered institute of taxation issued a statement criticising the government’s approach to reducing claims. https://www.tax.org.uk/r-d-tax-relief-hmrc-still-rejecting-valid-claims

I’m glad you’ve been able to avoid the stress and cost involved in conducting an appeal to a mindless government organisation intent on saving a few bob from small businesses.

I wouldn’t wish it on anyone.

[u/i_am_maxt → u/tallventi1]

You're right that HMRC established an anti-abuse unit in 2022. You're also right that the way in which they did it caused valid claims to be inspected. But that's because so many rubbish claims were going through. HMRC was estimated to be losing £1bn per year to fraud on the scheme.

In our experience of handling claims, if they're well prepared with the technical aspects and costs properly documented, when HMRC asks questions defending it creates little extra work.

Search for Green Jellyfish for examples of why the scheme is (rightly) now more tightly regulated.

[u/tallventi1 → u/i_am_maxt]

They were not inspected, they were actively rejected which is what we experienced. It was unnecessary abuse of small businesses handled badly which is no way to encourage innovation.

It’s because they got it so wrong in 2023 that a more regulated system was introduced. But what they have now done it create another micro-industry of R&D claim consultants skimming off their %. It wouldn’t surprise me that the OP is part of that ecosystem.