How long does it take for HMRC to make a decision on an R&D Tax Credit claim?
A claim for R&D Tax Credit can prove to be a vital lifeline for businesses, particularly if they are new or struggling to stay afloat. Waiting to see if your claim was successful - as well as when it will be applied to your business account - can be very stressful for business owners and timing can be everything.
What are R&D Tax Credits?
Introduced in the year 2000 for SMEs, and 2002 for larger companies, R&D Tax Credits were brought about by the UK government as a tax incentive to encourage businesses to invest in innovation. It works by offering a reduction in a company’s Corporation Tax liability to reflect the amounts it has spent on its innovation activities. Last year more than 39,000 UK companies took advantage of the scheme, claiming nearly £3.5bn in tax relief. Only Limited Companies are eligible for R&D Tax Credits which can either bring a company’s tax bill down, or can be paid as a cash credit representing a percentage of its R&D expenditure.
Who can claim?
If your business was engaged in any kind of R&D over the last 12 months then you may well be able to apply for R&D Tax Credits to either increase taxable losses or decrease your tax bill. If your business makes a loss on its eligible R&D expenditure, you can decide to ‘cash-in’ or ‘surrender’ your losses against an HMRC claim.
Many more companies are qualified to receive R&D Tax Credits from the UK government than you might think, with innovation spanning just about every sector and industry. Essentially, all a company needs to do is show HMRC that the product or service you are claiming for was designed to solve a particular technological or scientific problem. It needs to be truly innovative, whether it’s in regard to a brand new product or service or an enhancement of something that’s already on the market.
So how long does an R&D Tax Credit claim take?
HMRC works to process applications for R&D Tax Credits within 28 days. However, the processing time required for HMRC to look at and consider an R&D Tax Credit claim depends largely on the nature of the claim itself in addition to the complexity of a company’s structure and its accounting. Even the time of year can make a difference, with peak accounting times such as March and December being particularly busy and therefore slower.
In general, the key thing in determining how long HMRC will take to consider an R&D Tax Credit claim is whether your company is a larger company or an SME. Any delays in HMRC’s processing times, whether planned or unforeseen, can impact on how long it takes for companies to receive the credits they are due.
Don’t forget as well that HMRC can instigate an enquiry into a company’s R&D Tax Credit claim. Enquiries can be launched for a number of reasons and usually aren’t anything to worry about, but until they are resolved a business will not receive any offer of tax credits. Usually in these cases, HMRC has further questions it needs to be answered by the company although they can be rather long and protracted, especially if not dealt with correctly.
Claims made by SMEs
If your business is an SME, HMRC offers a range of guidance on how it will treat your R&D Tax Credit claim in terms of review and administration. This guidance states, as mentioned, that HMRC will aim to process applications within 28 days, meaning that SMEs should have the result, and payment, pretty fast.
However, this again depends on workloads and resources. Applications made over the summer, Easter and Christmas periods may well take longer to process than ones which are submitted at other times. Additionally, where HMRC is especially busy, for example during peak accounting times, there could again be a delay in turning round a claim.
Complexity is important too as long, complex claims with sizeable amounts of supporting documentation are likely to take longer than an application which is less involved. Longer, more detailed claims submissions can also be considered by HMRC to run a higher risk of inaccuracies so will need extra attention which again takes time. Finally, claims are reviewed in conjunction with a company’s tax return so are not considered in isolation; the PAYE, VAT and further tax affairs of the business may well be looked at closely too.
Claims made by larger companies
Similar issues apply to larger companies as they do with SMEs, particularly with regard to seasonal peaks and busier times. However, it must be remembered that bigger companies tend to generate bigger claims which can be more complex than those of SMEs, so tend to take longer to process anyway. The tax returns of larger companies tend to be more complex too, and if the company is involved with specialisms like transfer-pricing for example, these need to be taken into consideration when HMRC reviews the Corporation Tax return for the entire year.
What happens if an R&D Tax Credit claim is submitted after the payment date for Corporation Tax has passed?
In this case, HMRC will provide a refund once the claim has been processed (assuming any tax due has been paid). However, if the R&D Tax Credit claim is finalised and submitted with the tax return prior to the tax due date (usually nine months and one day after the current accounting period has finished), the business can then make sure it pays the right amount in the first place. The beauty of paying tax in quarterly instalments is that companies can properly plan their R&D Tax Credit claims which in turn can positively affect cash flow.
Where can I turn to for help and advice if I have questions or concerns?
Tax Cloud UK is part of Myriad Associates, an expert team of experienced R&D tax consultants. We will be pleased to answer any questions you may have, allay any fears and work with you to facilitate your R&D Tax Credit application to give you the best chance of a success and maximising your claim.
Sign up to Tax Cloud to today to begin your R&D claim. With separate service offerings for both businesses and accountants, using Tax Cloud is a fast and accurate way of claiming R&D tax credits in 2019.
To discuss anything further, call us on 0207 118 6045 or use our contact page for excellent quality, professional advice.
- Submitting R&D tax claims since 2001
- 100% success rate
- Over £100m claimed and counting
- Industry leading specialists
- In-house technical, costing and tax experts
- Member of the Research and Development Consultative (RDCC) committee
Meet some of the team behind Tax Cloud