R&D tax credits are changing from April 2023 - find out how it could affect your business
Find out how the qualifying cost categories and rates are changing for the SME and RDEC schemes and how corporation tax...
You’ve submitted your R&D Tax Credits claim and are waiting for approval and a welcome cash boost for your business. But what’s the hold-up at HMRC?
The good news is that a lag in processing time is unlikely to mean something’s wrong with your application – the cause of the delay is most likely to be that HMRC has extended their turnaround targets across all claims.
At SeedLegals, we’re experts in R&D tax relief claims. By working closely with HMRC as a member of the Research & Development Communication Forum (RDCF), we’re perfectly placed to guide you through the process.
In this post, we explain what’s happening at HMRC, how it affects your R&D claim and when you can expect your payment.
The Government announced in the 2022 Spring Statement that they are tightening the criteria for the R&D scheme. The resulting R&D tax relief changes come into effect from April 2023. The updates are designed to refocus on UK-based innovation and to clamp down on fraudulent claims.
As part of the drive to tackle irregularities, HMRC is currently carrying out enhanced compliance checks into many of the claims they receive. This has led to general delays across the service.
On 17 May 2022, HMRC announced they were temporarily suspending payments of R&D claims. This pause allowed them to investigate an increase in irregular claims, but also led to a backlog of payments.
On 14 June 2022, HMRC announced they were extending their timeframe to process claims from 28 days to 40 days.
The extra compliance checks have had several knock-on effects:
At the July RDCF meeting, HMRC confirmed that their target for processing R&D claims is still 40 days. Keep in mind that this is the target to process claims – in many cases, companies face a further wait to receive payment after their claim is approved.
If you have any questions about your R&D claim’s progress, HMRC has advised that the best way to get answers is via the HMRC portal – rather than emailing or phoning for an update. Your claim will appear on the portal after HMRC has approved it or they’ve processed the payment.
At the RDCF meeting in July, HMRC confirmed that they’ll return to their target turnaround time of 28 days after this current phase of increased scrutiny.
So far, there’s no indication of when exactly R&D claim times will return to normal. We expect the increased scrutiny won’t continue for much longer.
However, keep in mind that many companies submit their R&D claims in September or December, and processing times naturally take longer in HMRC’s busiest months.
This delay in processing also affects claimants who have already been approved through Advance Assurance. HMRC will apply the same scrutiny to these claims during this period as any other claim.
Because of these delays to processing and payment, it’s more important than ever to check that your submission contains all the details HMRC requires.
To avoid waiting even longer, make sure these details are correct and appear consistently on the documents you submit to HMRC:
If you use SeedLegals to build your R&D claim, we’ll check everything is present and correct before you submit.
Don’t forget that you also need to fill out and file a CT600L form as part of your claim.
It’s worth noting that September and December are the most popular months for corporation tax submission in the UK and many companies submit their R&D claims at the same time. This means that if you submit your R&D claim during these months, it’s likely to take longer to have it processed and paid.
If you want to beat the rush and get your R&D cashback or tax credits faster, it’s a good idea to submit in quieter months so you don’t get caught up in the backlog.
With SeedLegals, it’s quick to build a claim that’s 100% HMRC-ready. Our powerful technology and in-house expertise make sure that your claim is as comprehensive and accurate as possible, so you can be ready to submit sooner and with full confidence.
When the dust has settled and HMRC brings their processing and payment times back down again, we’re confident that the upcoming changes in 2023 will make the R&D scheme fairer and more generous for innovative UK startups.
Read more about how you’ll be able to claim for more of your software costs in our article about the 2023 changes to R&D tax relief.
Wondering if you qualify? Not sure how it works? If you’re thinking about starting an R&D claim, book a free call with our R&D specialists: