More Changes to the R&D Tax Credits Scheme for SMEs

Following on from our previous blog, Watch Out…There’s Changes Coming to the R&D Scheme, HMRC have further updated their guidance regarding the changes to the R&D tax credit regime for SMEs from 1st April 2021. All the changes are designed to reduce the risk of fraud and abuse and takes the form of a cap on the value of the tax credit which can be claimed.

The guidance, which was again updated on 4th March 2021, has reverted to the original proposal that the new cap will only apply to accounting periods which begin on or after 1st April 2021.

The details of the cap previously advised, remain unchanged. We’ve summarised what’s changing below and what you should know…

Changes to form CT600 from 1st April 2021

As of 1st April, 2021, where companies are submitting claims for either a Research & Development Expenditure Credit (RDEC) or SME payable tax credit, they’ll now be required to complete a supplementary page – the CT600L, when submitting their corporation tax self-assessment and/or when making any amendments to that self-assessment.

Small and Medium sized companies who are only making a claim to reduce their tax liability, as per currently published guidance aren’t required to complete the additional pages.

WHY’S THIS NEW FORM NECESSARY?

Certain errors were occurring in processing R&D tax credit claims. One example of this were submissions of RDEC claims. More specifically, certain companies had incorrectly used RDEC at Step 1 to discharge liabilities, which were due from a company as if they were an amount of corporation tax chargeable on the company.

On a positive note, by completing the new form, it’s likely that R&D claim submissions will have a faster processing time, by reducing errors in processing. All claimants filing R&D tax credit claims should be aware of this upcoming change.

The entries currently required in the main CT600 return will still be required, although HMRC anticipates that where these entries are duplicates of the figures in the CT600L, software will automatically populate duplicated boxes.

WHAT HAPPENS IF YOU DON’T FILE THE FORM?

The form, once enacted, will be mandatory in order for an R&D tax credit claim to be processed. In 2019, HMRC made it a requirement to include supporting evidence with submitted R&D claims. This new form’s another step in the process and if the form isn’t submitted or filed with the R&D claim, it’s more likely that HMRC won’t process the R&D tax credit claim.