New R&D CT600L Supplementary Page From April This Year
Find out what you need to know about R&D Tax Credits and the new CT600L form launching in April.
Speeding up the process and preventing fraud
HMRC has recently announced a new change in the way all UK companies submit their application for R&D Tax Credits. It’s due to kick in on the 1st April 2021, and adherence is set to be mandatory.
From April, all companies submitting their claim via the SME or the RDEC branch of the scheme will now need to fill in an additional page - the CT600L. This supplementary form should be included when their Corporation Tax self-assessment is submitted, or at the stage when any amendments to the self-assessment are required.
The government has outlined a number of benefits in introducing the CT600L which we’ll look at in this article. But importantly, it’s likely the measure will speed up the processing time of R&D Tax Credit applications, as well as reducing fraud. All claimants looking to receive R&D Tax Credits should be aware of this upcoming change.
Why is the new CT600L form needed?
The primary reason for the CT600L is to reduce fraudulent R&D Tax Credit claims. Whilst the majority of unsuccessful claims are typically down to innocent errors, a certain percentage of them are due to fraud. Unfortunately, we know that millions of pounds of fraudulent claims are actually successful each year, taking up taxpayer resource and damaging the reputation of the scheme.
But even innocent mistakes are extremely easy to make. The process of claiming R&D Tax Credits is notoriously complex with eligibility rules changing regularly. RDEC claims in particular can bring about awards of hundreds of thousands, or even millions, of pounds. In relation to this, we’ve found that sometimes companies have wrongly used RDEC when they should have used the SME scheme or vice versa. Additionally, many companies that look on the face of it to be prime SME candidates should actually claim under RDEC due to previous state aid.
Other frequent errors companies make when applying for R&D Tax Credits include:
- Not working with R&D tax specialists on their application, instead attempting a ‘DIY approach’
- Submitting information that is incomplete or irrelevant, often leading to HMRC questions and delays in processing
- Not leaving enough time to make the application before the deadline, so missing out important details
- Poor communication between a company’s regular accountant and specialist R&D consultants. This can lead to the submission of incorrect Corporation Tax self-assessments and yet more delays.
If any of your clients fall foul of the above, or of any other common mistakes when claiming R&D Tax Credits, they will likely have their claim rejected.
…And rejection can be far harsher than it sounds
If the claim is rejected altogether your client won’t receive a payout - which could be the difference between staying afloat and going under. Indeed, HMRC takes a dim view of any companies submitting an R&D Tax Credits claim that contains errors.
If a mistake is suspected, HMRC will initially ask questions to understand more. Hopefully that will be the end of it, but all too often it isn’t. This is when things can get ugly with possible fines, repayments, reputational damage and even court action.
Avoiding an enquiry
All this begs the question: how can my clients avoid being the subject of HMRC scrutiny? Sometimes they can’t - often HMRC will just pick a case at random to investigate. But there are ways companies can reduce the chances of an enquiry, and increase the likelihood of a positive outcome.
The first thing we want to say here is this: Encourage your clients not to be complacent. Just because they’ve successfully claimed R&D Tax Credits before, doesn’t mean they automatically will be able to again. And even if they follow the exact same process, there’s no guarantee the whole thing will be seamless and easy.
Essentially, every R&D project is unique and the same level of diligence must be applied each time. Any previous feedback from HMRC should be taken on board and acted upon too - simply updating documentation from last time won’t cut it.
Secondly, it’s crucial that whichever company member(s) contributing to the submission are absolutely clear on the criteria (which is where we come in). We’ve found in the past that some companies have tried to go it alone, only to come to us later when they’ve got themselves in a muddle. Generally unintentional, it’s simply a lack of understanding about the criteria and information required. Even the most competent of business accountants themselves can struggle, as it’s extremely difficult to recognise the boundaries of R&D projects, and where eligible costs lie, if it’s not something you do day in day out.
Finally, many applications for R&D Tax Credits are put together by finance teams. This in itself can be a problem, as such teams often don’t have a strong understanding of the underlying technology or science. HMRC need to see this information presented in a specific way, and there are also strict categories of costs and how to apportion them.
This is why accountants from up and down the country partner with experienced R&D tax and funding professionals like us at Myriad Associates. Not only can we make sure your client’s R&D Tax Credits application adheres to all HMRC criteria before submission, we’ll fully maximise it too.
Is it mandatory to submit this additional form?
It looks like the CT600L form, once it goes live, will be compulsory for all R&D Tax Credit claims. Back in 2019, HMRC stipulated that supporting evidence must be submitted R&D claims, and was very particular about what this evidence should be. The CT600L is another part of this requirement, and HMRC is highly unlikely to process an R&D Tax Credit claim without it.
Why else should my firm partner with Myriad Associates?
At Myriad Associates we are proactive in understanding all R&D Tax Credit requirements and what updates HMRC are set to make.
Having worked with companies and their accountants throughout the UK and Ireland for many years, we know what makes a claim successful - and how to avoid HMRC scrutiny.
See our two recent blogs for more information:
- 5 excellent reasons to work with an R&D tax relief consultancy
- How Myriad Associates can work with both you and your clients remotely