The research and development (R&D) tax credit scheme helps businesses save thousands of pounds every year. Companies conducting work that qualifies as research and development are eligible to claim R&D tax credits to offset their corporation tax, or get a payable cash sum.
Many companies mistakenly believe they cannot take advantage of R&D tax credits once their tax return has already been filed. Although this could be a costly mistake, there is good news as the rules allow for retrospective claims for R&D tax credits.
A company can make a retrospective claim for R&D tax credit relief for any accounting periods ending in the past two years (24 months). Imagine a company that has been conducting R&D and has an accounting period ending on 31st March.
For any R&D conducted in year ending March 2020 (between 1st April 2019 and 31 March 2020) – any claim must be made by 31 March 2022.
For any R&D conducted in year ending March 2021 (between 1st April 2020 and 31 March 2021) – any claim must be made by 31 March 2023.
Accounting periods are typically twelve months long. So when this company hits the R&D claim deadline at midnight on 31 March 2022, they can no longer recoup the money spent on qualifying activities between 1st April 2019 and 31 March 2020.
Of course, companies don't just have accounting periods ending in March. As another example - if a company has a June year-end. If they conducted R&D activities in their year ending 30th June 2020, between 1st July 2019 and 30th June 2020, they have 2 years after the end of that accounting period to make a claim. So they have until 30th June 2022 to claim R&D tax credits for their work in the year ending June 2020.
Will HMRC extend the two-year deadline if a company misses its claim submission?
It is extremely unlikely for HMRC to extend deadlines for companies that miss the two-year deadline to make R&D claims. Only under very special circumstances would they accept any returns after the date of this final deadline.
Some examples of such exceptions would include:
An extended claim is evaluated on an individual basis and evidence is required to support it. It is not believed that workload is the reason for missing a deadline. This is due to the two year period which is still available for a claim to be filed. If the potential to claim is only learned about after the deadline for an accounting period the claim is lost.
if a company fails to file their corporation tax return on time they could face fines from HMRC. But if a company files their corporation tax return on time but fails to include an R&D tax credit claim within their return before the deadline, they will forever miss out on the opportunity to claim R&D tax credits for that accounting period.
With an average claim of £50,000 – there could be an opportunity of missing out on large sums. However a company can still claim for the more recent accounting periods – as long as they claim before the deadline.
Schedule a free consultation with our team of experts to learn more. We’ll discuss the R&D tax credit and help you determine if our solution is a fit for your company.
Chancellor Jeremy Hunt has announced a series of changes to the UK research and development (R&D) tax relief regime, including a cut to the deduction and credit rates for the SME scheme, the R&D tax credit. The rate of the large company scheme, the R&D expenditure credit (RDEC) will be increased from 13% to 20%, […]
HMRC has recently set out its upcoming reforms to the R&D Tax Relief schemes that will form part of the next Finance Bill. Alongside some minor legislation updates to address anomalies in the schemes, the reforms as they stand will cause four major changes to the schemes. The first of which could catch out start-ups, […]
If your company has been making a loss, it’s still worthwhile making a claim for R&D tax credits. This is sometimes misunderstood with people thinking that a company needs to be profitable to benefit. In fact, applying for R&D tax credits as a loss making company might be the most beneficial way to get the most from the scheme.