Research & Development tax relief claims continue to be a very important part of technology and science start-up companies’ cashflow, forming a significant part of their funding strategy.
HMRC aim to turn around R&D claims made under the generous SME rules within 28 days with advisors and clients being able to chase claims not repaid within this period. More recently claims have been processed well outside of this period, often taking up to 3 months to be repaid and in some cases even longer. This has put strain on the cash flow of those start-ups which rely on claims to help fund their R&D projects.
The position has been worse for larger companies, funded projects and sub-contract R&D claims made under the RDEC rules, with claims taking up to six months to be processed. HMRC’s automated response provided for R&D claims chased in July stated that the oldest RDEC claim outstanding at that time was submitted in December 2018.
The Chartered Institute of Tax (CIOT) have been corresponding with HMRC as a response to its members’ concerns over the significant delays in processing times of claims. The CIOT have stated that HMRC are now taking action to reduce these delays for both SME and RDEC claims and are taking the following steps:
- additional staff are being moved onto the processing of R&D claims, covering both R&D tax credits and RDEC claims;
- HMRC will not be differentiating between R&D tax credits and RDEC claims for processing purposes and are aiming to get up to date on all claims;
- HMRC are in the process of moving claims processing to colleagues in customer services group who, with a wider pool of staff, will be able to cope better with seasonal fluctuations in demand; and
- HMRC will continue to provide updates through the R&D Consultative Committee regarding their current position and expected turnaround times.
This will come as welcome news to the thriving tech sector in Bristol.
If your company incurs expenditure on developing new products or processes or spends money on making appreciable improvements to existing ones, you may be eligible to make an R&D tax relief claim. A successful claim under either of the schemes (SME or RDEC) can reduce the company’s tax bill or in loss making companies generate a repayable tax credit. Claims made under the SME scheme could see the company gain a benefit of up to 33p for every £1 of qualifying R&D expenditure. Claims made under the RDEC rules receive a benefit of approximately 9p in the £.
For more information on this, please feel free to contact Pete Edwards, one of our Tax specialists.