Key Takeaways from Our R&D Tax Credit Changes Webinar

On 28th January 2025, we hosted a highly anticipated webinar covering critical changes to the UK’s R&D Tax Credit Scheme, with a strong focus on the newly introduced Merged R&D Scheme and Advanced Notification Form (ANF). Despite some technical glitches, the event provided valuable insights to businesses already claiming R&D tax credits and those considering it as a strategic funding option. Here’s a summary of the key points discussed.

Understanding the Advanced Notification Form (ANF)

The Advanced Notification Form (ANF) is now a pivotal requirement introduced by HMRC for accounting periods starting on or after 1st April 2023. Key points about the ANF:

What’s the purpose of an ANF?

The ANF notifies HMRC of your intent to submit an R&D claim. It’s not mandatory to follow through with a claim, but without submitting the form, you may lose the ability to claim altogether.

Who Must Submit the Advanced Notification Form?

• Businesses new to R&D claims.
• Companies that haven’t submitted an R&D claim in the last three years.

Submission Deadlines

You must submit the ANF within six months after the end of your accounting period.

What information is required on the form?

• Basic company details,
• Accounting period dates,
• And an overview of intended R&D activities—this doesn’t need to be overly detailed but should reflect the nature of the work.

Tip: Submitting the ANF early helps establish proactive planning, aligning with HMRC’s preference for real-time R&D project management rather than retrospective claims.

The Merged R&D Scheme—What’s Changed?

The Merged R&D Scheme, introduced for accounting periods starting on or after 1st April 2024, consolidates the former SME and RDEC schemes.

What’s new?

• Inclusion of Subcontractor Costs: Unlike the previous RDEC scheme, subcontractor costs are now eligible.
• Simplified Grant Treatment: No more splitting claims for grant-funded projects—everything falls under one scheme.
• Unified Claim Process: While the scheme has changed, the claim process remains consistent with existing HMRC submission requirements.

The shift to a “above-the-line” scheme means the credit is visible in financial statements, benefitting both profit-making and loss-making companies.

Subcontractor Rules—Who Owns the R&D?

Subcontractor arrangements have been a hot topic, with HMRC aiming to clarify “whose R&D is it?”

Key clarifications:

• If a company outsources R&D to a third party as part of its own project, the outsourcing company can claim for the costs.
• If the subcontractor conducts R&D independently or assumes the risk, they can make the claim themselves.
• HMRC is working to eliminate “double claims”—where both parties claim for the same activity.

More guidance is expected from HMRC soon, as definitions around subcontracted R&D continue to evolve.

Overseas R&D and PAYE Restrictions

HMRC’s new rules aim to restrict claims for overseas R&D activities unless the work couldn’t be replicated in the UK. Additionally, companies must ensure that any externally provided workers (EPWs) have UK PAYE references, or their costs may not be eligible for claims.

Action Point: When planning projects, proactively confirm subcontractors’ PAYE status and clearly define R&D ownership in contracts to avoid claim issues later.

R&D-Intensive SMEs—Eligibility for Enhanced Claims

Our experts covered updates to the R&D-Intensive SME scheme, which allows certain loss-making SMEs to claim enhanced credits.

Eligibility criteria:

• For accounting periods ending before 1st April 2024: Businesses must spend at least 40% of their turnover on R&D.
• For periods starting on or after 1st April 2024: The threshold reduces to 30%, broadening eligibility.

While this scheme aims to support highly innovative startups, it’s expected to impact a small percentage of claimants, particularly in R&D-heavy industries.

Proactive planning is essential under the new R&D landscape.

Here’s what your business should do now:

1. Submit the ANF Early: Don’t wait until the deadline. Get into the habit of submitting it annually to avoid missing out.
2. Review Subcontractor Agreements: Clarify R&D ownership and ensure PAYE compliance for external workers.
3. Model Your Claims Proactively: Understand the financial impact of the Merged Scheme on your future claims.
4. Stay Informed: HMRC’s guidance is evolving, so keep up-to-date with changes, especially regarding subcontractor rules and grant-funded projects.

Need tailored advice?
We’re here to help you navigate these changes and secure your R&D funding with confidence. Contact Us to speak to one of our R&D Experts.