Claiming R&D Tax Credits is straightforward and risk-free, as long as submissions comply with legislation, short-term concessions, and new submission requirements, as Luvo Financial partner Ian Batkin explains.

 

Financial benefits

  • R&D Tax Credits continue to be a solid, good and proven financial benefit and boost for businesses, especially because businesses will:
  • pay less Corporation Tax;
  • generate significant cash repayments from HMRC in relation to tax previously paid, or by cashing-in losses by claiming payable cash credits;
  • access as much as £50,000 (recent average per claim) in R&D Tax Credits;
  • receive payment a few weeks after submitting the claim – HMRC settles 95% of claims within 28 days.

Latest changes

There are three main changes to be aware of:

    1. Taxable losses during accounting periods that end between 01/04/20 and 31/03/22, can now be carried-back three years (for tax refund purposes), rather than just one year as previously. The maximum / capped carry-back is £2m in respect of these two additional years (the one-year carry-back is still uncapped). Importantly, this means Corporation Tax paid previously at 19% can be recovered, rather than cashing-in losses at 14.5% if a payable cash credit payment is claimed. This will be beneficial, and generate larger repayments for some businesses that have been loss-making due to Covid-19 and the government’s lockdown measures.
    2. The much anticipated PAYE / NIC cap on payable cash credits took effect on 01/04/21 and is applicable to all accounting periods ending after this date. The cap on payable cash credit payments is £20,000 + 300% of total PAYE + NIC liabilities during a 12-month accounting period. So, if a company has for example £50,000 of PAYE and NIC payable in the year, the maximum payable cash credit it will be able to claim is £170,000 (and on this basis, the maximum loss that can be cashed-in at 14.5% would therefore be about £1.172m). Companies still have the option to carry-forward losses (in whole or in part) and any losses in excess of the capped amount can also be carried-forward (to off-set against future taxable profits). Thankfully, most SME’s will be unaffected by this, but sadly some will be.
    3. With effect from 01/04/21, companies making a payable cash credit claims are required to file a supplementary page CT600L, as part of the CT600 tax return submission. The information required is not particularly onerous or time consuming – the issue though is ensuring the tax software used complies with this new requirement. Some software has already been modified, but others are ‘still working on it’; it’s worth checking if the software you use has been modified. There is a legitimate way around this if the software you are using isn’t yet able to accommodate the CT600L; this involves submitting R&D Tax Credits claims, where there is a payable cash credit payment being claimed, manually / using an old-style paper submission, but inevitably this will lead to a delay in settlements (and so should be avoided if at all possible).

Financial boost to ease the return to business as usual

As we begin a careful slow start on the path out of lockdown, many businesses will be looking towards recovery and getting back to something akin to ‘business as usual’. But if this important first step is overshadowed by worries of how to fund the recovery, remember the government’s risk-free, legitimate R&D Tax Credits scheme.

Ask Luvo

Luvo Financial is an established, independent, professional firm specialising in R&D Tax Credits and Patent Box claims. We have a 100% claims success record, and work on a contingent (no-win-no-fee) basis when advising and supporting SME businesses to make successful and worthwhile R&D Tax Credits and Patent Box claims – call or email us for an initial, confidential chat.