Estate planning involving pensions is a tax-efficient strategy for the... Read more
What is the R&D Additional Information Form?
23 August 2023
The Government have introduced new requirements to streamline the tax credit claim process for Research and Development (R&D). As of 8th August 2023, you need to complete an R&D Additional Information Form (AIF) to claim tax relief for your business.
The AIF has been added to the R&D tax credit claim process to:
- enhance transparency
- improve claim accuracy
- enable efficient processing.
In this article, we’ll take a look at all you need to know about the AIF.
WHAT IS R&D TAX RELIEF?
R&D tax relief supports innovative companies seeking to make an advance in science or technology. Your business must be working on an appreciable improvement that is not obvious to a competent professional in your field. It’ll need to relate to either your existing trade, or one you will start up based on your results.
WHAT DOES THE AIF DO?
The AIF is designed to provide HMRC with comprehensive details on the nature of your business’s R&D activities, the associated costs, and any supporting evidence. This form is a supplement to the existing claim process. If you already follow good practice the information required will be contained in your current documents.
KEY ELEMENTS OF THE AIF
Detailed R&D Project Description
This section is key to the process, as it will give HMRC a greater understanding of the project. And it’ll give a more accurate representation of whether you’d be eligible for R&D tax credits.
To give a clearer picture, you’ll need to outline the objectives, methodologies, uncertainties and innovative aspects. You’ll be asked to provide:
- A brief description of the main field of science or technology.
- The baseline of science or technology you sought to advance.
- The scientific or technological knowledge your company sought to advance.
- The scientific or technological uncertainties the company faced.
- How you looked to overcome these uncertainties with your project.
- Which tax relief you’re claiming for, and the amount (e.g., R&D tax relief, expenditure credit, or both).
Eligible R&D Cost Breakdown
You’ll need to give a detailed breakdown of eligible R&D costs to ensure both compliance and accuracy. This should include:
- Direct costs – employee wages, materials and any subcontractor expenses.
- Indirect costs – utilities, overheads.
Partnerships and Collaboration
Did the R&D project involve working with external entities? If so, you’ll need to disclose some information on partnerships with, for example:
- research institutions
- other businesses.
This will help HMRC correctly assess the collaborative nature of your project and the associated benefits and costs will be accounted for.
WHAT ARE THE BENEFITS OF THE AIF?
- Accuracy – more comprehensive project details, breakdown of cost and supporting documents, delivered upfront, will improve the accuracy of your claim.
- Efficiency – by reducing the need for additional information requests, the AIF will reduce processing delays and will streamline the R&D tax credit claims process.
- Transparency and compliance enhancements – more accurate and reliable information will promote and strengthen the incentive for R&D tax credits.
WHAT ARE THE DRAWBACKS TO THE AIF?
- More work involved – there’s no avoiding the fact that for the majority of businesses, filling in an AIF form is going to make the tax credit claims process more time-consuming.
- Expense – the cost of R&D services for clients may rise to sufficiently support businesses through the changes.
WHO CAN SUBMIT AN AIF?
An AIF can be completed by a company representative, or an agent acting on behalf of your business.
If you’re a company representative, you’ll need the Government Gateway user ID and password you used when you registered for Corporation Tax.
Agents will use an agent services account.
The introduction of the AIF helps to formalise the claims process. Some businesses may have already met these standards, but this form will speed up the process for those who may have fallen short with claims previously.
If you’re concerned about any of the points above and would like to speak to our R&D team, give us a call on 0330 173 5715. We’re on hand to clarify anything you need to know about research and development.