How to get your R&D tax credit cash sooner than you may think.
As the pandemic continues, many businesses are experiencing cashflow issues. If your business spends money on innovation, you could get an injection of cash through the the R&D tax credits scheme.
If you already know about this scheme, you may be thinking you’ll have to wait until the end of your accounting period (‘company year-end’) before you can submit your claim. But there is a way you can claim earlier, even if the end of your accounting period isn’t for a few months. Here’s how:
#1 Shorten your accounting period to reap early R&D payment
- You can shorten your company’s accounting period as many times as you like, for whatever reason. This is a relatively easy thing to do and means that you can file your accounts and tax return early, effectively allowing you to do an R&D claim, reaping the benefit ASAP.
- For loss making companies, this means you get a cash credit potentially much sooner than you would otherwise.
For example: we’re in October 2020, but the end of your company’s accounting period end date isn’t until December 2020. You could shorten the company’s accounting period to 31 October 2020, allowing you to make an R&D claim from 1st November 2020 (instead of waiting until 1 January 2021). If you submitted your claim in early November, you would likely receive the cash in December (based on an average turnaround time of 6 weeks).
If you’re not sure what your accounting period end date is, you can check on the Companies House website. Just search for your company, view the details, and check the date listed after ‘Next accounts made up to’.
#2 Lengthen your previous accounting period to cover a few extra months
If your company is just a few months past its year end (‘accounting period’), and you haven’t yet filed an R&D claim for that period you can lengthen your previous accounting period to cover the additional few months up to now.
- This would maximise the credit you get and mean you only need to file one set of accounts rather than two.
- Note that lengthening the period can normally only be done once every 5 years.
What happens next?
If this is something that you’re interested in doing, the team at Square Mile would be very happy to help you. We can help you to change your company’s accounting period in addition to filing your accounts and tax return. Whilst your accounts and tax return are being prepared and filed, we can also make a start on your R&D tax credit claim.
Act sooner rather than later
With the ongoing situation surrounding COVID-19, HMRC’s team will not be operating at 100% capacity. In addition, there will be lots of businesses trying to get their R&D claims submitted over the next few weeks and months, and so we expect a backlog to form over the coming few weeks. As a result, we recommend businesses get their claims in as soon as possible.
Receive an advanced payment of up to 75% of your claim
HMRC usually takes 6-8 weeks to make payments for claims, but payment can be delayed for a number of reasons. Sometimes HMRC is very busy, as is the case this year with R&D tax credit payments being delayed by up to three months. Other times, HMRC will require further evidence to confirm that R&D has taken place and that the expenditure was actually incurred. This can delay the process by up to 12 months, depending on how many enquiries the review raises. This can lead to significant cashflow issues for some companies. Fortunately, there is an option for you in the form of a bridging loan.
We work with several lending partners who have made hundreds of loans to businesses seeking to borrow against their expected tax credits. We work in collaboration to provide loan finance to bridge companies to their next milestone event. That could be a fund raise, or a large contract win or delivery of a consignment of goods and products.
We can help you arrange an R&D tax credit loan which could pay up to 75% of your expected claim upfront, with the remainder paid when HMRC pays out the claim. Funds can be available in as little as a week.