In these uncertain times as businesses start implementing continuity plans, cash flow planning becomes even more important. Whilst the government continues to put measures in place to help business and individuals through the provision of various grants, business loans, sick pay, extended ‘time to pay’ arrangements etc, submitting the company’s R&D Tax claims sooner rather than later is an important cash saving option that should also be considered. However, in the current climate this may possibly be the last thing on company Directors’ minds, as they firefight to keep normality within business operations.
Key points to note:
- SMEs (Small & Medium sized Entities) can claim a tax benefit of up to 33% of eligible costs. For large companies the tax benefit is 9.72% net of tax, going up to 10.53% from 1 April 2020.
- The tax benefit is receivable through a reduction in tax liabilities or in cash from HMRC, where the company has no tax liabilities to pay.
- Whilst the R&D claim is made within the company’s CT return for the year, a retrospective claim can be made through an amended tax return. Therefore, there is an opportunity to claim for prior year activities and costs, subject to claim filing deadlines set out below.
- The claim must be filed by the first anniversary of the filing date for the relevant tax return; This is generally two years from the end of the accounting period. For example, a company with an accounting period ending 31 December 2020 may submit a claim relating to expenditure incurred in the accounting period ended 31 December 2018.
The tax savings from making a R&D claim can be very valuable, particularly in the current climate. The average SME claim is around £54,000, depending on the level of eligible activities and costs incurred. Companies should therefore consider making claims as soon as possible to secure this funding.
In the meantime, I wish you, your teams and communities good health.