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How far back can your clients claim R&D tax credits?

If your client’s companies have been undertaking qualifying R&D and have not yet claimed R&D relief, they may make a claim for a tax return period that has already been filed with HMRC. The time limit for this is two years after the end of the accounting period. Bear in mind that some clients will not necessarily realise the accounting period isn’t necessarily the same as the tax return date.

R&D tax credits are a form of Corporation Tax relief and the latest you can amend your Corporation Tax return is typically 24 months after the end of the accounting period

New to claiming R&D tax credits for your clients?

For established businesses accounting periods are usually a standard twelve months, although there may be specific circumstance when they are different.

So as an example of the 24 month deadline could look like this:

  • Client files their accounts to 31 March each year
  • They have until 31 March 2022 to make a claim for their accounting period ended 31 March 2020.
  • The actual deadline is midnight on 31 March 2022.
  • After that it won’t be possible to claim tax relief on R&D qualifying expenditure incurred between 1 April 2019 and 31 March 2020.

Does it matter which R&D tax relief scheme clients are using?

Both the SME R&D tax relief scheme and The Research and Development Expenditure Credit (RDEC) scheme offer Corporation Tax relief so the 24 month deadline applies to both.

Already claiming R&D tax credits for clients?

Even if you or your client have made a tax credit claim for an accounting period in the past there is every chance that we can improve on it. When accountants work alongside us, they know that they and their clients will be in safe hands for the future but one of the first things we do is go back for two years to do all we can to improve the claims and reports already submitted. So that opportunity isn’t lost.

How can I claim R&D tax relief for start up businesses?

Despite the COVID–19 Pandemic having a major imprint on the UK economy in 2020 and continuing through 2021, 20,000 new businesses were launched in the tech sector alone. That is a new tech start up every 30 minutes. The IT and tech sectors are intrinsically embedded with R&D work and this form of tax relief could be vital for any company in its infancy. Having said that, any fledgling business that has qualifying activity should make sure that they take advantage of R&D tax credits. With 407,505 new businesses born across all sectors in 2020 (ONS) there will be an enormous amount of qualifying activity waiting to be unearthed.

Things can be a little different for clients in their  first year of business. The date they register the business with Companies House sets their incorporation date. It’s the incorporation date that becomes the default registration date so their first accounting period is set to twelve months from the end of that month.

If this isn’t convenient it’s very common to move the accounting year to another date. It follows that the clients  first financial period can vary, from 6 to 18 months.

When it comes to claiming R&D tax credits the deadline for filing will always be two years from the end of each accounting period, regardless of the length of each accounting period. In actual fact this applies even if the length of your clients accounting period varies for any reason, not just because they are a new business.

What if the start date of the project is before the period we can claim?

If clients have started an R&D project prior to the two years deadline, but the project is ongoing then it can still be considered for a claim. If we are able to identify qualifying expenditure on R&D activity during your last two accounting periods, then clients are still able to claim, regardless of when that particular project started.

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