Updates From HMRC's R&D Communication Forum

The latest HMRC R&D Communication Forum shed light on some key developments that are set to reshape the future of R&D tax credits and advisory services. With potential regulatory changes on the horizon and trends indicating a decline in R&D tax credit claims, both businesses and advisors need to stay alert and prepared to adapt.

Changes on the horizon for R&D tax credits

One of the most significant points of discussion during the forum was the current state of R&D tax advice and the potential for increased regulation. At present, this market is largely unregulated, allowing individuals and companies to offer tax advice with minimal oversight if they aren’t members of a professional body. This has prompted HMRC to explore regulatory measures aimed at preventing poor-quality claims from advisors who lack the technical expertise to prepare a robust and compliant submission.

Whether the new framework will be overseen by HMRC, a professional body, or an entirely new regulator remains to be seen. The aim, however, is clear: to ensure that all advisors meet a minimum set of professional standards, giving businesses more confidence in the advice they receive when navigating the complex R&D tax relief process.

Will Regulation Discourage R&D Advisors?

One of the big questions raised by these potential changes is whether regulation will discourage some advisors from continuing to offer R&D tax advice. It’s a valid concern, particularly for smaller firms or those who may not have the resources to meet the new standards. Stricter oversight could see some advisors exit the market if they find the cost or effort of compliance too high.

That said, this isn’t necessarily a bad thing. While regulation may reduce the number of available advisors, it could also improve the quality of advice across the board. The most respected R&D advisers will always want to offer value. They should be putting the same diligence, rigour, and consistency into each claim. And this should be apparent in a strong commitment to client service, investing in a highly skilled team of engineers, sector specialists, chartered tax advisers, and R&D specialists with knowledge that cannot be easily matched elsewhere.

It’s possible that those advisors who remain in the market will be better equipped to handle the complexities of R&D tax claims, and businesses can benefit from a higher standard of service. In fact, for more established firms that are already committed to best practices, regulation could serve as a differentiator, reinforcing trust between clients.

Read what you should consider when choosing an R&D tax advisor.

Will businesses turn to filing R&D claims themselves?

Another consideration is whether businesses will start filing their own R&D claims if they feel their advisors are no longer up to scratch under the new regulations. This could happen, especially if businesses lose confidence in their advisors’ ability to meet the new regulatory requirements.

However, the complexity of R&D tax credit claims should not be underestimated. The process requires a solid understanding of both tax law and the technical aspects of qualifying R&D activities. Many businesses may find it too risky to handle claims themselves, fearing they might make costly mistakes or fail to secure the maximum relief.

In reality, most companies will likely continue seeking professional advice, especially from advisors who are able to meet the new standards. While some may be tempted to go it alone, the intricacies involved in making successful claims will likely keep them reliant on expert help, especially in light of HMRC’s increasing scrutiny of R&D tax credit submissions.

Claim Notification Form (CNF) and the Additional Information Form (AIF): What you need to know

The forum’s Q&A session highlighted that the Claim Notification Form (CNF) is already catching some businesses off guard, making it essential to understand when and how to submit this form to avoid derailing your claim. Alongside this, the Additional Information Form (AIF) has become far more than a simple box-ticking exercise; it’s now a crucial component that requires careful navigation to stay on HMRC’s good side.

These two forms are no longer just paperwork but are make-or-break elements in ensuring the success of your R&D tax credit claims, making it vital for businesses to stay informed and prepared.

What is the Claim Notification Form (CNF)?

The Claim Notification Form (CNF) is latest hurdle in the R&D claims process. This one’s a biggie, and it’s causing quite a stir. If you’re making an R&D claim for the first time or haven’t filed one in the last three years, you’re now required to let HMRC know in advance by submitting the CNF. Sounds simple enough, right? Well, it can be… if you know the rules.

You’ve got six months from the end of your accounting period to submit the form, and if you miss that deadline, you could wave goodbye to your claim. Yes, really. It’s as strict as that. What’s tripping up some businesses is figuring out whether they even need to pre-notify in the first place, as the rules aren’t exactly straightforward. But don’t let this form put you off—it’s about getting ahead of the game and giving HMRC a heads-up that you’re coming their way.

What is the Additional Information Form (AIF) and why does it matter?

If you thought the CNF was a bit of a faff, the Additional Information Form (AIF) is where things really start to feel like a marathon. From 2 October 2024, the updated AIF will be mandatory, and, spoiler alert—it’s longer, more detailed, and asks a lot more of you.

Gone are the days when you could cherry-pick which R&D projects you reported. Now, HMRC wants the top 10 projects by value, no exceptions. You’ll need to dive deep into each of these projects and provide all the details about what you’ve spent and why it qualifies. This includes breaking down subcontracting arrangements and ensuring you’ve got PAYE references for all your externally provided workers (EPWs). If you don’t have these details handy, you’ll need to explain why on the form.

And let’s be clear: this isn’t the kind of form you can just breeze through. HMRC is getting stricter, and it’s no longer enough to put “see attached report” in the box. That kind of shortcut might have worked before, but now it’s likely to lead to your claim being rejected or taken through an compliance check. The AIF isn’t just another admin task—it’s central to making sure your R&D claim stands up to scrutiny.

Getting the forms right

As the AIF and CNF get more complex, the risk of tripping up increases. HMRC has made it crystal clear: incomplete or poorly filled-out forms won’t cut it. Mistakes or missed information could lead to lengthy delays in processing your claim—or even an outright rejection.

But here’s the good news: you don’t have to go it alone. At Kene, we specialise in making sure your CNF and AIF are filled out correctly, cutting through the complexity and ensuring your claim are compliant. We’ve got the experience and the expertise to handle these forms so you don’t have to. Let us do the heavy lifting, while you get back to what really matters—growing your business and driving innovation.

These updates to the R&D claim process might sound daunting, but with the right support, they don’t have to be. By staying ahead of the CNF and AIF requirements, you can avoid the hassle and secure the relief your business deserves.

Update: following the RDCF, HMRC made a key change to the legislation: amended claims submitted after April 2023 will no longer count as advance notification. A separate notice must now be submitted for these claims. However, claims within original returns are still valid as advance notification.

A decline in R&D tax credit claims

Another major insight from the forum was the decline in R&D tax credit claims. HMRC has already seen a drop in claims for the 2024-25 tax year compared to the same period in 2023-24, and this trend is expected to continue.

There are several reasons behind this decline. One factor is HMRC’s increased focus on compliance and enforcement, which has likely deterred some businesses from submitting claims, especially if they have been impacted by past enquiries. Furthermore, reduced relief rates may have shifted the cost-benefit analysis for some claimants, making the potential return on investment less attractive.

More personal interaction with HMRC

On a more positive note, there was encouraging news from the forum about improved communication channels with HMRC. It was confirmed that phone calls and meetings are now possible where appropriate, particularly with the Wealthy and Mid-Sized Business Compliance (WMBC) team. This marks a shift away from the often frustrating back-and-forth process of handling enquiries solely through letters. There’s hope that this more personal approach will soon be adopted by the Individuals and Small Business Compliance (ISBC) campaigns and projects team as well. This change could help speed up the resolution of enquiries and improve the overall experience for businesses.

Watch our latest roundtable to understand more about how communication works during an HMRC enquiry and the key differences between cases handled by a named caseworker versus a non-named caseworker.

Looking ahead: what’s next for R&D tax credits?

As the R&D tax credit landscape continues to evolve, businesses must keep a close watch on both regulatory developments and the ongoing compliance focus from HMRC. While tighter regulation may reduce the number of R&D advisors in the market, it could also provide a greater level of confidence for businesses, ensuring that their advisors meet high professional standards.

At Kene, we’re here to help businesses navigate these changes. Whether you’re concerned about the impact of regulation on your R&D claims or need expert advice to maximise your relief, our experienced team is ready to guide you through the process.

Book your free consultation here to speak with our R&D funding experts.

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