HMRC doubles payout time for R&D tax relief

As a means of combating what it perceives as an increase in fraud, Taxman doubles the amount of time smaller businesses must wait before receiving R&D tax credits, from one month to two.


The processing time for R&D tax relief claims will double from one month to two months, according to HMRC.


A surge in fraudulent or incorrectly completed applications means that small businesses may have to wait longer to receive R&D tax relief.

Small and medium-sized enterprises claimed a total of £5.9 billion in R&D tax credits in the year ending in April, but the taxman is requesting more details to verify the validity of those claims.


In the year leading up to April, fraudulent claims grew to 4.9% of all claims made by smaller enterprises at an estimated cost of £469 million.


This increased from £336 million (3.6%) of all claims the previous year.

According to the Office for Budget Responsibility, the cost of the reliefs will rise from £7.7 billion in 2021–22 to £11.9 billion in 2026–27.


As the amount spent by smaller businesses on R&D has actually decreased since the tax credit was introduced in 2000, back in March it was reported that former chancellor Rishi Sunak sought to restrict which companies qualify for tax incentives on research and development.


Rishi Sunak, the chancellor at the time, was said to want to restrict which businesses may receive tax incentives for research and development because smaller businesses had actually spent less money on R&D since the tax credit was introduced in 2000. This was reported back in March.


How to make sure you receive your R&D tax credit


· At least six months before to the end of the financial year, you must notify the IRS of your plan to file a claim. This will be valid for fiscal years starting on or after April 1, 2023.

· There are experts available if your accountant has questions about obtaining R&D tax credits:-

RDS

haysmacintyre

Carax

Leyton


· Leave out any costs that are not eligible for reimbursement. R&D activities like the following generally qualify: – Software development – Designing new products – Precision engineering – Products with new materials – Enhancing existing products or technologies – Typical R&D expenditures can cover staff costs and subcontractor cost


What is an R&D claim worth to your business?


Currently, our average claim is over £53,000, but when the new amendments from the Spring Statement go into effect, this number is likely to increase even more. Specialist companies like our own will conduct interviews with SME clients, prepare the returns, and only charge a fee for approved credits.


Recent instances of R&D Tax Credits from our own portfolio of 120 SME clients include a York-based fleet management company that won £50,000 over two years and a company that manufactures modular portacabins that gained approximately £68,000 in one year.

Even after five years of working in this field, I'm constantly surprised by how few SMEs are utilizing the program. Through a successful company tax reclaim and subsequent annual savings on future corporation tax bills, businesses can get access to thousands of pounds to reinvest in their operations. Finding out if you qualify simply takes 15 minutes, therefore in my opinion, it is a no-brainer.