One of the most important aspects when making an R&D Tax Relief claim is timeframes. Not only are there strict deadlines, but depending on your business circumstances there is an optimum time to make your claim. The last thing you want is to miss out on maximising your R&D Claim, or even worse lose out on claiming altogether!
Let’s find out those all important dates, and make sure you never miss out on money that belongs back in your business.
WHAT IS THE DEADLINE FOR MAKING AN R&D CLAIM?
The hard and fast deadline for making a claim is two years AFTER the end of the accounting year in which you incurred the costs. Pass this date and it’s game over….the money has gone.
But let’s take a look at the exceptions to the rule, as these could come in handy for you one day. Although with us, you shouldn’t need them…
WHAT ARE THE R&D CLAIM DEADLINE EXCEPTIONS?
1. EXTENDED YOUR YEAR END?
If your company has an extended year end, then the filing date changes to the end of the extended accounting period.
e.g. A September 2019 year end is extended to March 2020, extending the period to 18 months.
The deadline for claiming the costs incurred in the 18 month period from September 2019 to March 2020, is March 2022.
2. OOPS FILED LATE?
If your tax return was filed late, the hard deadline is not automatically extended, but HMRC can use their discretion.
e.g. A September 2019 return is filed late in March 2021.
HMRC have the discretion to allow an amendment beyond September 2021. You can’t rely on this, but it’s worth being aware of for negotiating purposes if it ever happens.
3. GOT AN ENQUIRY WITH HMRC?
If HMRC has an enquiry open with you, an amendment to the tax return would have to be made as part of the HMRC enquiry. In theory the deadline is extended when an enquiry is open. However, again this is up to HMRC’s discretion, so the safest course is to always put the claim in before the normal deadline i.e. within one year of the original filing date to ensure HMRC do not refuse the claim. Why risk it? Now we have the deadlines down, it’s time to look at the optimum time to make your R&D claim, to ensure you are making it work in the best way for your business.
WHEN SHOULD I MAKE MY R&D CLAIM?
Knowing when to make your R&D claim depends on the bottom line; ultimately whether you made a profit or not.
MY COMPANY MADE A LOSS…
If your company made a loss and you want to get some cash back into the business asap, the answer is simple, make your claim as soon as possible, which is when your accounts and tax return are prepared and ready for filing. You’ll probably want to make the tax credit claim and get the money back and working for your business. Get it done ASAP.
Side note: If you are in the fortunate position of not needing the cash, and if you forecast making profits in the future, then another option is to hold onto the R&D losses so you can offset them against your future tax bills. This could happen for example if you had a loss making year due to Covid, but are now back on track to make profits in the current year.
MY COMPANY MADE A PROFIT…
Now if your company has made a profit, it’s a little different. The benefit will come by reducing the tax bill which is due 9 months and 1 day after your year end. Let’s explore that a little….
Company A has a 31st March 2021 year end.
They have taxable profit of £100,000, and are expecting a corporation tax bill of £19,000, due on 1st January 2022. However, Company A spent £50,000 on R&D.
The R&D relief they are due is calculated as follows: £50,000 x 130% = £65,000
Company A can now subtract £65,000 from the taxable profits, to reduce the corporation tax bill.
The corporation tax due is calculated as follows: (£100,000 – £65,000) = £35,000 x 19% = £6,650
Company A makes a saving of £12,350! Pretty cool huh?
The real benefit for Company A comes down to the timings and the impact on their cashflow:
SCENARIO 1 – CLAIM BEFORE TAX RETURN
Company A completes the R&D claim prior to the tax return before 1st January 2022 (when the tax bill is due). As a result they pay £12,350 less on 1st January 2022, keeping the cash in the business.
SCENARIO 2 – CLAIM AFTER TAX RETURN
Company A completes the R&D claim after the tax return, but before the deadline of 31st March 2023. As a result they can claim a refund of £12,350 from HMRC, plus a tiny bit of interest.
You see, with R&D, it’s all about the timings!
WE CAN HELP YOU…
At Vibrant, we work with you to ensure you are doing everything reasonably possible to maximise your R&D Tax Claim, including making your claim at the right time for your business.
If you think you might be eligible to claim, or your business circumstances have changed and you’d like to discuss your R&D claim, please do get in touch on Bev / Lauren on 01332 460184 or email firstname.lastname@example.org.