How HMRC’s changes will affect you if you use R&D software to prepare claims?
Research and Development tax relief is an initiative created by the HMRC to encourage companies to invest in R&D software to help them prepare claims. This type of technology enables businesses to take advantage of R&D tax credits, which can be incredibly beneficial for businesses who are looking to save money on their taxes. However, the HMRC recently announced changes that could have a major impact on how businesses access and use R&D software. In this blog post, we will explore how these changes could affect you if you use R&D software to prepare your claims and what steps you should take in order to protect yourself.
What is HMRC?
If you claim R&D tax relief, you may be affected by recent changes HMRC have made. Here’s what you need to know.
HMRC is the UK government department responsible for collecting taxes and enforcing tax laws. They recently announced changes to the way they will treat software used in preparing claims for Research and Development (R&D) tax relief.
Previously, if a company used software to prepare their R&D tax credit claim, they could only deduct the cost of the software if it was essential to the R&D project. This meant that many companies were unable to claim for the full cost of their software as they could not prove that it was essential.
The new rules mean that companies can now deduct the full cost of any software used in preparing their R&D tax credit claim, regardless of whether it is essential to the project or not. This will make it much easier for companies to claim for the full cost of their software and should result in more money being available for investment in R&D.
What are the changes HMRC is making?
The changes that HMRC is making will affect those who use R&D software to prepare their tax claims. The main change is the introduction of a new online service, called the Research and Development Expenditure Credit (RDEC) service. This will replace the current paper-based system and will be available for use from April 2018.
HMRC has also announced changes to the way in which they will calculate the amount of tax relief that can be claimed for R&D activities. From April 2018, businesses will only be able to claim 65% of their eligible R&D expenditure, compared to the current rate of 230%. This change will not affect small or medium sized enterprises (SMEs), who will continue to be able to claim the full 230% relief.
How will these changes affect those who use R&D software to prepare claims?
If you use software to help prepare your Research and Development (R&D) tax credit claims, you may be affected by some recent changes HMRC have made.
In particular, from 1 January 2019 HMRC will no longer accept manually prepared paper claims for R&D tax credits. This means that if you want to claim for R&D tax relief, you’ll need to do so using software that is approved by HMRC.
There are a number of software packages available that can help you prepare and submit your R&D tax credit claims. Some of these are designed specifically for R&D tax purposes, while others are more general purpose accounting or tax software packages that have been approved by HMRC for this purpose.
If you’re not sure whether your software is approved by HMRC, you can check the list of approved software on the Gov.uk website.
The main change here is that from 1 January 2019, all claims for R&D tax relief must be submitted electronically using approved software. This shouldn’t be a major problem for most people, as there are a number of good quality software packages available that can assist with the preparation and submission of claims. However, it’s worth checking in advance to make sure that your chosen software package is on the list of approved products.
What are some alternative methods of preparing claims?
There are a few alternative methods of preparing claims that you could use instead of R&D software. One option is to use the government’s online system, which is called G-Cloud. This system allows you to submit your claims electronically and track their progress. Another option is to use an HMRC-approved accountant or tax advisor to help you prepare your claims.
Conclusion:
HMRC’s changes to the R&D software used for tax relief claims will have a significant impact on how claimants approach their claim. It is important to understand and stay up-to-date with these changes so that you can ensure your claim is valid, compliant and efficient. If you are considering using R&D software, it is best to speak with a professional who can advice you on the best course of action depending on your individual circumstances. By being aware of HMRC’s new rules and regulations, preparing an R&D tax relief claim may be made easier in order to maximize your return while also minimizing any complications or risks involved.