R&D relief is a tax incentive available to UK companies undertaking R&D (Research and Development) work1. One of the features of the R&D relief schemes is that companies are often eligible to receive a tax refund as part of their tax relief claim, even if they have not paid any corporation tax. This provides a valuable cashflow benefit to eligible companies, so our R&D clients often ask us how long it will take for the tax repayment to be received from HMRC.
One of the main things to look at before answering the above question is: under which R&D relief scheme is the company claiming the tax relief? This can have a considerable impact on the timing of any tax repayment.
There are two types of R&D relief: the SME scheme and the RDEC scheme, with companies being eligible for one or the other depending on their size and whether or not they receive external grant-funding for their R&D work for instance. Sometimes, companies can claim under SME for some of their R&D projects and RDEC for other R&D projects, depending on the circumstances.
HMRC have a 28-day target timescale for dealing with R&D relief claims under the SME scheme. Therefore companies whose tax return only includes a SME claim can often receive their tax refund within three weeks, although there is sometimes a delay for larger claims. RDEC claims can often take longer, and there is no set HMRC timescale for dealing with these.
Another important matter to take into account is the type of documentation presented to HMRC. At Alliotts we have considerable experience of preparing R&D relief claims, so we are well-placed to advise clients on the presentation of the information within their R&D report. If everything is well presented with a suitable level of information, then it is less likely that HMRC will ask questions. Any HMRC enquiries inevitably lead to delays in processing the R&D relief claim and issuing the tax refund.
For more information about R&D tax relief and how the incentive works https://www.alliotts.com/services/business-tax/rd-tax-relief/
If you have questions about R&D relief and are looking to optimise the timescale for receiving your R&D tax refund, please do not hesitate to contact us.
1Research and Development (R&D) reliefs support companies that work on innovative projects in science and technology. It can be claimed by a range of companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects. https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief