Research and development (R&D) claims

Given the current economic climate, HMRC has recently received a high volume of queries in relation to the operation of the R&D regime and the processing of claims.

The CIOT has been in contact with HMRC and received confirmation on 2 April 2020 of the following points:

  • processing of claims ― HMRC has confirmed that while the processing of claims will not be accelerated, it is still aiming to clear 95% of SME tax credit claims within 28 days, so claims for most companies should be processed within that time frame
  • R&D repayments ― in terms of the research and development expenditure credit (RDEC), HMRC has confirmed that any repayment must first be offset against other liabilities owed to HMRC (eg PAYE), as this is a legislative requirement. However, it is considering the position for SME R&D credits, where there may be more flexibility. HMRC has confirmed that R&D repayment claims (both for large companies and SMEs) will not be offset against tax liabilities that have been postponed under the VAT deferral scheme announced as part of the response to coronavirus. However, payments of tax that are delayed under time to pay agreements remain subject to offset

Navigate the complexity of tax with Tolley Guidance. Get started with a free trial today.

  • filing and amendment dates ― HMRC was sympathetic to the potential for late claims as a result of operational difficulties caused by coronavirus. HMRC advised that if a company was unable to meet the time limit, it should submit the claim as soon as possible, and HMRC may be able to accept late claims in line with Statement of Practice 5/01
  • the ‘going concern’ requirement ― HMRC has confirmed that this statutory requirement must be met for a claim to be valid and, as such, that they were unable to set it aside. However, HMRC did note that the condition only requires that the claimant company is a going concern according to the last published accounts, which for many companies will have been at a stage before the impact of coronavirus. HMRC is due to monitor the impact of coronavirus on customers’ ability to meet this and other requirements, and where coronavirus is causing genuine operational difficulty, companies are advised to approach HMRC as soon as possible
  • coronavirus business interruption loan scheme ― HMRC has confirmed that this is notified state aid. However, this will likely only be relevant were the loan is used specifically towards the company’s R&D expenditure on a project, rather than being intended more generally to support the company, which will depend on the facts of each case. If the loan was used towards an R&D project, none of the expenditure on that project would qualify for SME R&D relief, but relief would still be possible under RDEC

For further information on R&D relief for SMEs and large companies, see the Outline of tax relief for research and development (R&D) expenditure guidance note.