My client has already submitted their corporate tax return. Can they claim R&D Tax Credits retrospectively?
Although R&D Tax Credits have been around since the year 2000, many companies - and indeed many company accountants - are still not taking full advantage. This is a huge missed opportunity as claims can be worth many thousands of pounds which UK businesses often urgently need.
The relief is offered in respect of innovative work undertaken to broaden scientific and/or technological knowledge in any given field. The government’s logic behind it is that innovative companies then grow and reinvest, which benefits the wider economy.
So why aren’t people claiming?
We come across all sorts of reasons why clients and their accountants haven’t claimed R&D tax relief previously. Often it’s simply because they didn’t know the scheme existed or they wrongly believed their work wasn’t eligible. Sometimes clients say their company is too big or too small, or that their business is in the wrong field (when in fact the relief is open to any business of any size in any industry).
Many people also believe that applying for R&D Tax Credits is a massive headache and they just can’t be bothered or don’t have time. This one’s an interesting one; yes, it’s likely to be a headache if companies try to go it alone. But it’s not painful - or time consuming - if accurate recordkeeping has taken place and they/their accountant works alongside an R&D tax relief consultancy such as ourselves.
At Myriad Associates we deal only with R&D tax relief and have spent the last two decades working alongside both companies and company accountants to secure our 100% success rate. We can help you and your clients to navigate the often complex process, accurately identifying and accounting for costs and putting together a high quality narrative. It also means you can rest assured there will be no costly and stressful HMRC investigations.
R&D Tax Credits in a nutshell
Research and development (R&D) Tax Credits is a government incentive offered to UK limited companies which encourages them to invest in innovation. The scheme works by reducing a company’s tax liability or by giving a cash refund for companies that are making a loss.
When it comes to defining R&D work for tax relief purposes, the scope is incredibly broad. But it’s essentially about taking risks and spending money on making an appreciable difference to science or technology. So if your client has recently created a new product, process or service, or has spent time and money on improving an existing one, then they could well be eligible for R&D Tax Credits. For SMEs this can be worth a very generous 33 pence for every £1 spent on R&D costs.
Who and what is likely to be eligible for R&D tax relief?
There are a large number of different types of R&D expenses that can be included in a claim for R&D Tax Credits. These are things like staff wages/salaries, materials, certain software and overhead costs and money paid out to subcontractors. The scheme is also open to any UK company that has a Corporation Tax liability, and you may be surprised at what clients can claim for.
What’s the time limit for claiming R&D Tax Credits?
The government currently stipulates a time limit for R&D tax relief claims of two years from the end of the accounting period during which the R&D project took place. This is because R&D Tax Credits are a relief against an organisation’s Corporation Tax liability, and the deadline for amending a Corporation Tax return is generally 24 months after the company’s accounting period ended.
What if my client has already filed their company tax return for the period during which the R&D work took place?
As long as the time limits as described above are still adhered to, your client is able to file an amended CT600. The amended return will then be filed which includes the R&D Tax Credit claim. In fact sometimes it's even better to do this.
Because it can actually represent a bit of a shortcut and may well even accelerate the processing of the claim. Along with using the services of R&D tax relief professionals such as ourselves, using this ‘amending shortcut’ can also reduce the likelihood that your client will face an HMRC enquiry.
Essentially it works like this: Your client files their tax return as usual, alongside the CT600, but leaves out the amount they’re claiming for R&D Tax Credits. An amended CT600 is then submitted afterwards, which does contain the R&D Tax Credit claim amount. This ensures the client’s application goes straight to an HMRC specialist in R&D Tax Credits, rather than someone with more generalised knowledge. R&D specialists at HMRC who will deal with the amendment are more likely to make sense of your client’s application, and be less likely to begin an enquiry.
Say for example today is the 30th August 2019. A company with an accounting period that ends on the 31st December can make a retrospective (late) claim for R&D Tax Credits for its accounting periods ended:
- 31st December 2017 (time limit for claiming expires on the 31st December 2019)
- 31st December 2018 (time limit for claiming expires on the 31st December 2020)
So as you’ll see, there’s a two year limit after the accounting period in each case. However, it’s still strongly recommended that companies don’t put off claiming. It’s well worth avoiding a last minute rush by getting in there early.
At Myriad Associates (developers of the Tax Cloud portal) we’re here to work alongside you in helping your client with their R&D Tax Credit claim. To find out more about how we aprtner with accountants, why not visit our Tax Cloud for accountants page?
Of course you can also give us a call on 0207 118 6045 or use our contact page - we look forward to working with you.