HMRC are faced with unprecedented demand at the current time. They play a critical function in helping companies access cash that is available from R&D tax credit claims. I am giving you an update in terms of the processing of R&D tax credit claims by HMRC from direct communication we have recently had with their R&D tax team.
HMRC have indicated their first priority when processing R&D tax credit claims is to maintain its published aim of clearing 95% of SME tax credit claims within 28 days and have implemented contingency plans to support this, including extra resource. Currently they are meeting this aim and I understand that HMRC staff can work remotely so hopefully they should continue to do so.
In respect of meeting filing deadlines, HMRC appreciates the operational difficulties companies are facing. If a company is unable to meet the time limit for claiming (normally 12 months from the filing date of the corporation tax return), it should submit the claim as soon as possible and HMRC may still be able to accept a late claim. This might mean claims for the year ended 31 March 2018 can still be made even though the statutory deadline has passed. However, HMRC may still require a reasonable excuse before accepting late claims.
The going concern condition is a statutory requirement when making R&D tax claims and it is one HMRC have indicated they cannot overlook. The condition requires a claimant company to have been a going concern according to the last published accounts. In many cases these will have been prepared before the effects of COVID-19 so that there should not be any issue, although this could become more of a factor in the future.
R&D Tax Credit Claims – Cash is Key
I am sure your clients are contacting you with concerns about their finances at this time and this is keeping you busy. Please also remember when talking to clients that R&D tax credit claims can generate significant cash sums which could be incredibly valuable at the current time. Cash can be generated from a claim by:
- Repayment of corporation tax previously been paid. This can generate nearly 25p of cash for every £1 of R&D expenditure incurred.
- Cash payments even where little or no corporation tax has arisen. This can generate up to 33.35p of cash for every £1 spent on R&D.
It is important to ensure that claims are maximised. You may also have clients who have been intending to look into whether they could claim but haven’t yet got around to doing so. Or perhaps other clients don’t realise they are carrying out qualifying activities. We have a simple checklist and this may be helpful for completion to help identify potential claims – please let me know if you would like a copy of this.
We are available to help if you or your clients would like us to do so. Please see details of our team at the attached link – https://ianfarley.com/about-ian/. You will see that we have a team of 10 and are well placed to advise companies on R&D tax claims across all sectors. Please note the following about us:
- We have a team of engineers, scientists and software specialists who can prepare claims
- We have been advising companies on R&D tax credits for 20 years
- We only undertake work on R&D tax credits and the patent box
Please let me know if you would like to arrange a phone call to discuss any of the points in this email. Or please feel free to call me on 07752 386 484.