A growing number of businesses are claiming R&D tax credits in order to improve their cashflow during the coronavirus crisis.
The coronavirus crisis has created very difficult trading conditions for businesses, with many facing dramatically reduced revenues. Some businesses are therefore using the cash injection that R&D tax credits provide as a source of liquidity to see them through this period.
Only 43,000 businesses have used the R&D tax credit scheme since it was created in 2000. This suggests there are many businesses in the UK who are completely unaware of the scheme or have never made full use of it.
Businesses that have claimed R&D tax credits in the past should review all previous R&D claims that they have made to ensure they were claiming the maximum amount possible each time.
Applying for R&D tax credits can be a much easier and quicker way for businesses to improve their cashflow than applying for new loans or extending existing credit facilities.
SMEs applying for loans through the Government’s Coronavirus Business Interruption Loan scheme may also face long wait times so the cash provided through a R&D tax credit can be a useful way to tide them over until that arrives.
HMRC remain committed to meeting the standard timeframe of between 28-42 days to pay R&D credits. It is vital this timeframe continues to be met, as any potential delay could put many businesses in an even more difficult cash position than they currently find themselves in.
However, as accountants will already know, businesses must act responsibly when applying for R&D tax credits and should be aware that any short-term abuse of the scheme could result in investigations being launched by HMRC.
The Research & Development scheme was originally introduced to support business activities and spending on innovation. The average value of a R&D tax credit payment is £56,000*.
Businesses can also be eligible for the scheme by demonstrating the outcome of a business activity could create an appreciable improvement to a challenging problem, that could not be found by a competent professional. Many businesses may not be aware of the wide range of actions that can qualify under the scheme.
All businesses should therefore consider any activities they are undertaking to see if there is any possibility of submitting a R&D claim. Opportunities for making a claim are often overlooked – it is important that this changes given the current economic climate.
At PfP, we have been supporting businesses in claiming R&D tax credits for years and managed to secure millions of pounds in payments from HMRC. Speak to us to find out more.
*Average payment secured by PfP only