Slowdown in R&D tax claims ‘could cause severe problems’

Severe delays in Research & Development tax relief claims could cause many small IT companies severe problems, according to accounting and tax advisory firm Blick Rothenberg.

Tim Shaw, a partner with the firm, said: “We are aware that HMRC are currently experiencing severe delays in processing R&D tax relief claims. The delays are both unfortunate and unhelpful in the current climate where the UK is looking to attract and reassure businesses.”

He added: “As stated by HMRC, the current time taken to process claims under the SME scheme is 87 days, but this increases to 186 days for claims made under the RDEC (Research and Development Expenditure Credit) scheme. This less financially favourable RDEC scheme generally applies to larger company but SMEs, in certain circumstances, can be required to make claims under this scheme.”

The SME scheme applies to smaller companies and can create a payable cash amount equivalent, broadly, to 33% of qualifying expenditure. The RDEC scheme can give a similar payable amount of up to 9.7% of qualifying expenditure.

Shaw said: “It is unclear what is causing these lengthy delays which have increased significantly over recent months, but it is likely that it relates to a lack of available resources to process the claims in HMRC’s R&D team as opposed to specific Treasury policy.”

He added: “Under both schemes, eligible companies can receive cash amounts from HMRC based on qualifying research and development expenditure. Many smaller companies, especially those which are pre-revenue, use such cash payments from HMRC under the R&D schemes as a legitimate means of enhancing and improving their cash flow position and the current delays may impact adversely on such companies.”

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