When businesses need to tighten their belt, it’s not uncommon for research and development to be pushed to the bottom of the priority list.
However, for many businesses, R&D tax credits can be a crucial source of capital - especially for start-ups and SMEs investing heavily in experimentation and innovation.
This makes the expected timelines around your R&D claims extremely important - for some businesses, it may be the deciding factor in whether or not pursuing R&D activity is affordable.
But how long do R&D tax claims take?
Today, we’re delving into the claim process to answer exactly that, exploring all the variables and offering up some efficiency tips to give your business a realistic timescale as to when you can expect to hear back from HMRC.
How long does an R&D tax credit claim take to process?
HMRC aims to review every application within 28 days. However, the time taken to process a claim can rely on a variety of external factors, including:
The size and complexity of the claim
The size and complexity of your claim is perhaps the most common factor to influence the time taken to process it.
As a rule of thumb, SMEs making smaller and simpler claims through the SME R&D Relief Scheme will be processed far quicker than others. So, be sure to opt for this approach should your business have:
- Fewer than 500 staff
- A turnover of under €100m or a balance sheet total of under €86m
Of course, this isn’t to say all small SME claims will be processed in the blink of an eye. On the contrary, if your claim isn’t suitably detailed or your accounting isn’t entirely accurate, this can, of course, cause delays.
In some cases, this may even result in HMRC launching an enquiry into your claim. While this isn’t necessarily a cause for concern, HMRC enquiries often result in delays - learn how to minimise them here.
The scheme the claim is under
Larger companies with over 500 members of staff and a turnover of over €100m (or those with over €86 million in gross assets) may have applied for R&D tax credits through the RDEC scheme.
These claims are usually far more complex than those made through the SME scheme, often including multiple teams and projects and sometimes even coordinated internationally.
Combined with more complicated tax returns, these claims are expected to take longer to review, process and pay out.
The timing of the claim
Like any service, HMRC’s turnaround times can be affected by demand, with workloads affecting the allocation of resources towards any given claim review.
It’s not uncommon for some minor delays to be experienced when claiming during peak accounting times of year, such as March and December. With this in mind, plan ahead to keep processing periods short by effectively managing your R&D pipeline, ensuring you’re filing claims at optimal times.
Taxes and timescales: what’s the relationship?
All R&D tax credit claims are reviewed alongside a business’s tax returns, meaning it’s vital to ensure all PAYE, VAT and other tax payments are up to date before sending your claim.
Remember: if you’ve already paid the tax due, HMRC will refund your Corporation Tax once your R&D tax credit claim has been successfully processed. Alternatively, you can submit your R&D claim alongside a tax return to pay the appropriate amount the first time of asking.
To optimise the speed and efficiency of your claim, we recommend opting for the retrospective amendment of your completed tax return, rather than submitting your claim and returns simultaneously.
This is because you must include the figures for any R&D activity in your CT600, which is processed at a general HMRC office alongside the rest of your company tax returns. As a result, this is rarely reviewed by an R&D tax credit specialist - and given that this isn’t a common part of staff’s administration processes, you could experience greater delays as a result.
From phone calls and fact-checking to letters and emails, due diligence around your claim can cause significant disruption to turnaround times.
To avoid this, instead file your Corporation Tax calculations and your CT600 as usual, then make the necessary amendments once the claim has been processed. This way, you’ll be able to deal directly with HMRC’s R&D department, who’ll have the experience and know-how to assist with far greater efficiency.
Record keeping: the key to quicker credit
Every aspect of your claim benefits from proper record keeping.
Whether it’s amending your returns or outlining your technical narrative, accurate and detailed record keeping enables you to file your claim (and HMRC to process it) more quickly. Not only that - comprehensive records can help in maximising the value of your claim, too.
Keep track of any associated costs and activity, paying particular attention to:
- Staff - the members of your workforce on your payroll
- EPWs - externally provided workers from a third-party staff provider, such as staffing agencies and personal service companies, or a hired freelancer
- Subcontracts - outsourcing of qualifying R&D projects could be eligible for up to 65% of relief under an SME R&D tax credit claim
- Consumables - materials consumed or transformed in the pursuit of overcoming scientific uncertainty
We find real-time record keeping to be the optimal approach here, although this will ultimately depend on your business and its internal processes. To ensure your claim is processed in as little time as possible, learn how to keep proper financial records.
Although you’re ultimately at the mercy of HMRC, minimise the chances of a disruption to your claim by getting it right the first time around. Doing so will see your business reap the extra capital of R&D tax credits sooner, enabling you to embark on your next innovation.
Don’t fancy playing the waiting game? If you’re not fully confident in any aspect of your claim, get in touch with Lumo to learn how we can offer a helping hand.