Does your business carry out innovative work or invest in developing new products, processes, or technologies?
If so, recent changes to HMRC guidance could have a direct impact on your ability to claim R&D tax relief.
Recent changes to HMRC guidance have introduced new requirements around Research and Development (R&D) tax relief claims, particularly the need for a pre-notification process. These changes have significant implications for companies looking to claim R&D tax relief.
In this blog, we break down what the R&D pre-notification is, when and how it should be submitted, and why it's more important than ever to ensure compliance.
As of 1 April 2023, HMRC has introduced a mandatory pre-notification requirement for certain R&D tax relief claims.
This means that companies must inform HMRC of their intention to make an R&D claim in advance. The pre-notification must be submitted using a specific digital form, which must include relevant details such as the claimant company's UTR, the accounting period in question, and a high-level summary of the planned R&D activities.
This requirement applies to first-time claimants and those who have not submitted an R&D claim in the previous three calendar years. The intention behind this new step is to give HMRC visibility of upcoming claims and help them manage compliance more effectively.
The pre-notification rule is part of HMRC's wider efforts to tackle abuse of the R&D tax relief system and to improve the integrity of claims.
In recent years, there has been a noticeable increase in incorrect or fraudulent claims, often due to misunderstanding or misapplication of the rules. By introducing the pre-notification step, HMRC aims to reduce the risk of non-compliant claims entering the system.
In addition to deterring fraudulent claims, the new rule allows HMRC to better allocate resources by anticipating the volume and nature of claims. It also provides an opportunity for early engagement with claimants and advisers, potentially improving the overall quality of submitted claims.
Timing is critical when it comes to pre-notification. For accounting periods beginning on or after 1 April 2023, companies must submit their R&D pre-notification form within six months of the end of the relevant accounting period. Failure to do so may result in the company being unable to make a claim at all.
This six-month window is non-negotiable in most cases. For example, a company with a year-end of 31 March 2024 must have submitted its pre-notification by 30 September 2024. Missing this deadline can result in a forfeited claim, even if the company undertook qualifying R&D work and has valid grounds for relief.
Many advisers and claimants were misled by earlier HMRC guidance, which incorrectly suggested that pre-notification was not required for March, April, May, and June 2024 year-ends. This has caused confusion and, in some cases, missed deadlines.
One notable scenario involved a client with a 31 March 2024 year-end who did not submit a pre-notification form due to an ongoing enquiry for the previous year. Once that enquiry was resolved, the client wished to proceed with their 2024 claim, only to discover they were ineligible due to the lack of pre-notification. HMRC appears to be taking a strict stance on this, and late submissions are generally not accepted.
This situation underscores the importance of understanding and adhering to the correct guidance. While HMRC has corrected its earlier errors, the burden of compliance ultimately falls on the claimant.
In very limited circumstances, HMRC may accept a late pre-notification, but this is rare. The general position remains that if the deadline is missed, the right to claim R&D tax relief for that accounting period is lost.
HMRC has not published extensive details on what constitutes an acceptable exception. Anecdotal evidence suggests that technical issues with HMRC's portal or genuine incapacity may be considered. However, administrative oversights or misunderstandings, even if based on HMRC’s earlier guidance, are unlikely to qualify.
Given the high threshold for exceptions, businesses and their advisers should treat the six-month deadline as fixed and plan accordingly. Proactive compliance is key to protecting valuable tax relief opportunities.
To avoid missing the pre-notification deadline, companies should implement internal processes that align R&D activities with accounting and compliance calendars. Here are some practical steps:
By following these steps, companies can reduce the risk of non-compliance and preserve their eligibility for R&D tax relief.
Pre-notification is now the first official step in a broader, more regulated R&D tax relief claims process.
Once the pre-notification is submitted (if required), the claimant must still prepare and submit a full R&D claim as part of the company’s Corporation Tax return. This includes completing the R&D additional information form, introduced alongside the pre-notification requirement.
The additional information form must detail the nature of the R&D work, its uncertainties, and the costs incurred. Together, these documents provide HMRC with a more complete picture of the claim, enabling more effective scrutiny and reducing the chance of future enquiries.
By incorporating pre-notification into this workflow, HMRC is making it clear that R&D claims are to be taken seriously and should be backed by thorough documentation and clear justifications.
Submitting an R&D pre-notification is a critical step for businesses intending to claim R&D tax relief. HMRC has implemented strict rules around the submission process, and failure to comply can result in a range of negative consequences. To help businesses understand the importance of this requirement, here are the key risks associated with missing the pre-notification deadline:
To avoid these risks, businesses should ensure that they are fully aware of the R&D tax relief process and adhere to all relevant deadlines, particularly the timely submission of the pre-notification.
Understanding and complying with the R&D pre-notification requirement is essential for any business seeking to claim tax relief under HMRC's R&D schemes. The key points to remember are:
While the new rules add an additional layer of administration, they also offer a chance to improve the quality and defensibility of claims. Businesses that adapt to the changes proactively will be better positioned to secure the reliefs they’re entitled to.
At Pulse Accountants, we specialise in R&D tax relief and fully understand the complexities of HMRC’s pre-notification requirements. Our team of experienced professionals is here to ensure that your business complies with all regulations and maximises the benefits of the R&D tax relief scheme. We work closely with you to identify qualifying R&D activities, ensuring that all necessary forms are submitted on time, including the pre-notification form, to avoid missing out on valuable tax relief.
We offer a personalised service tailored to your business’s needs. Whether you’re making an R&D claim for the first time or need help with subsequent claims, we ensure that your submissions are thorough, accurate, and well-supported, giving you the best chance of success with HMRC. Additionally, our team helps manage deadlines, keeping you on track with all submissions to reduce the risk of late submissions and non-compliance.
With Pulse Accountants, you gain a trusted partner who takes the complexity out of the R&D claims process and helps you unlock the full potential of R&D tax relief while ensuring compliance with HMRC’s rules and deadlines.