How do I submit my HMRC R&D Claim?

How do I submit my HMRC R&D claim?

As a business who has eligible R&D expenditure to claim under either the SME, ERIS or RDEC schemes, you will have calculated your eligible R&D expenditure; but how do these numbers actually generate you a tax or payable credit? Below we explore the required documentation for an HMRC R&D Claim, calculations involved, what benefit you will receive and how this can be used in your accounts.

HMRC accounts submission documentation

The documents below are used to submit your company’s statutory financial data to HMRC and reflect the R&D Tax Credits: 

• If required a Pre-Notification Form needs to be completed with HMRC for certain accounting periods. 
• R&D technical report – Specifically to explain to HMRC why the R&D projects you have included in the R&D claim are themselves evidenced and meet the criteria of being R&D. This is now submitted through the Additional Information Form before the accounts are submitted. 
• Financial analysis of eligible R&D costs by project. 
• Accounts – typically prepared by your accountant and depending on the size of your business can be Micro, Abridged or Full accounts.  
• The Tax Computation is a statement showing the breakdown in tax for the accounting period. It shows how the tax has been derived after allowances for items such as Capital Allowances, R&D Tax Credits. 
• CT600 – A standard format document to file your Company Tax Return completed annually by ALL companies. It has sections dedicated to entry of SME, ERIS and RDEC claim details – Corporation Tax for Company Tax Return (CT600 (2021) Version 3) – GOV.UK (www.gov.uk) 
• CT600L – From 1st April 2021 there is now a new supplementary page to submit as part of a R&D Tax Credits claim. Corporation Tax: research and development (CT600L (2021) version 3) – GOV.UK (www.gov.uk) 

TBAT Innovation will assist in preparing the Pre-Notification, Additional Information Technical Report and the financial analysis.  Your accountant will prepare the accounts, tax computation and CT600/CT600L, and submit these to HMRC along with a PDF technical report as an attachment. This is how you submit your R&D claim to HMRC.    

R&D Tax Credits SME Scheme Pre 1st April 2023

With the SME scheme there will be a value of eligible expenditure related to costs incurred whilst undertaking your R&D projects. For the sake of argument let’s take a simple example of £100,000 of eligible R&D costs. This generates two numbers that are used in the HMRC submission: 

• Uplifted eligible spend @ 130% of the eligible expenditure = £130,000 
• Enhanced eligible spend @ 230% of the eligible expenditure = £230,000 
• Cashed in losses rate 14.5%

The tax liability is calculated in the Tax Computation and the Uplifted and Enhanced numbers are recorded into the CT600 and CT600L forms. The benefit for an SME based on this example can vary according to your profitability: 

• Profitable  £24,700 
• Breakeven £18,850 
• Loss making £33,350 

The average R&D claim benefit for an SME per year is around £60,000!! 

R&D Tax Credits SME Scheme Post 1st April 2023 

From the 1st April 2023 the value of the SME changed. For the sake of argument let’s take a simple example of £100,000 of eligible R&D costs. This generates two numbers that are used in the HMRC submission:  

• Uplifted eligible @ 86% of the eligible expenditure = £86,000 (from 130%) 
• Enhanced eligible @ 186% of the eligible expenditure = £186,000 (from 230%) 
• Cashed in losses rate 10% (from 14.5% 

The tax liability is calculated in the Tax Computation and the Uplifted and Enhanced numbers are recorded into the CT600 and CT600L forms. The benefit for an SME based on this example can vary according to your profitability:  

• Profitable £16,340 
• Breakeven £8,600
• Loss making £18,600  

R&D Tax Credits ERIS Scheme Post 1st April 2023 

As the SME scheme dropped in value a new scheme was launched to support those early stage SME loss making companies. Initially known as the SME Research Intensive scheme, now Enhanced R&D Intensive Support (ERIS). This allows companies with a research threshold of 40% in 23/24 and 30% after this period to cash in losses at the higher 14.5% rate, rather than the 10% SME Scheme rate. Based on the same £100,000 spend: 

• Enhanced eligible @ 186% of the eligible expenditure = £186,000 
• Loss making cash in rate @ 14.5% = £26,970  

R&D Tax Credits RDEC and New RDEC Schemes

A value of eligible expenditure related to your R&D projects which can include: 

• Large Company R&D projects.
• SME R&D projects subsidised by grants.
• SME R&D projects contracted to by a Large Enterprise.
• SME R&D for government organisation or foreign companies.
• After 1st April 2024 for any company subcontracted R&D and who contemplated the R&D.

There is a seven step RDEC process by which the RDEC eligible spend is adjusted, relating to Corporation Tax rates (currently 19%), the RDEC rate for the period (13%/20% pre and post 1st April 2023), direct R&D workers PAYE/NIC, outstanding Corporation Tax liabilities and other HMRC liabilities. The seven step process calculation is detailed in the Tax Computation, with resulting numbers being used into the CT600 and CT600L forms. 

A claim for £100,000 of eligible spend, would generate a specific benefit of:

• £10,530 pre 1st April 2023
• Up to £16,200 post 1st April 2023

if there were no restrictions on PAYE/NICs and HMRC liabilities.  

The Benefit of an HMRC R&D Claim

Once HMRC has received your accounts submission, one of three things can happen: 

• You pay less Corporation Tax.
• You receive a cash payment from HMRC for your R&D claim. 
• You offset losses carried forward or back for profits in other years.

Companies House documentation for an HMRC R&D Claim

There is also the separate requirement to submit accounts to Companies House within nine months of a year end. Of all the documents above, only the Accounts will feature on the Companies House website. The rest are confidential and are not publicly available, thus any cost associated with R&D projects and the sensitive technical detail in the report remain confidential. 

If you’re looking for additional help with your R&D Tax Credits claim, please contact us.