You can claim R&D Tax Credits up to two years after the end of your accounting period. To make the most of your claim, you must include all qualifying expenditure incurred during the financial period you’re claiming for before the two year period is over.
Don’t worry if you’ve already filed your corporation tax return. R&D tax credits are a Corporation Tax relief and the time limit for revising your Corporation Tax return is typically two years after the end of your accounting period.
The exact period applies if you’re a loss-making company due to receive cash credits or a profit-making company due to receive tax relief for your R&D tax relief claim.
R&D accounting periods
Accounting periods are typically 12 months long. For example, if your accounting period end date is March 31st each year, then you’ll need to submit your R&D tax credit claim for the accounting period April 1st 2019 – March 31st 2020 by midnight on March 31st 2022. This effectively means that you’ll be able to claim for R&D costs incurred a day less than 36 months before the claim date, one day off three years. Please be aware, as soon as you reach your R&D claim deadline, you can no longer recover the money you spent on qualifying costs over the accounting period.
Can your business change its accounting period?
If you want to prolong the R&D claim period, you can change your accounting periods (start and end date). If you wish, you can lengthen your accounting period to 18 months. You can also shorten the accounting period if you have an R&D project that you’d like to receive credit for sooner.
Alternatively, if you don’t want to shorten your accounting period but would like to receive your credit or relief sooner, it might be worth considering R&D advance funding. Advance funding gives you access to up to 80% of your future R&D tax credits up to 9 months before receiving the payment from HMRC. You can learn more by having a read of our advance funding guide.
The first accounting period for an SME
It’s common for newly formed SMEs to adjust their accounting year-ends after registering as a limited company at Companies House. This is because your first accounting period is automatically set as your company’s registration date. However, a more operationally convenient date like the UK financial year-end on March 31st is often preferred.
If you choose to change your accounting period during your first year of business, it could end up being anything from 6-months to 18-months. If you were to do this, it would mean that your first two accounting periods may not add up to 24 months (two years).
Even if the length of your accounting period is longer or shorter than 12-months, the deadline for submitting an R&D tax credit claim is still two years from the end of each accounting period. The same would apply if you changed your accounting period at any other time.
If your project started before the earliest accounting period you can claim for, but the project is still ongoing, your business can still claim for it. If you’re still working to resolve a scientific or technological uncertainty during your last two accounting periods, then you are still able to claim. However, if the uncertainty was settled before the previous two accounting periods, you will not be able to claim for it.
R&D claims outside the two-year limit
HMRC states that the two-year deadline to submit R&D tax credit claims is an adequate amount of time for businesses and will very rarely accept claims outside the time limit. However, they also understand that there are exceptional reasons why a claim isn’t made within the legal time limit. For instance, they might overlook claims outside of the two-year time limit if the cause is ‘beyond the company’s control.’ HMRC outlines the following two examples in its Statement of Practice SP 05/01:
- “At the date of the expiry of the time limit, the company or its agents were unaware of profits against which the company could claim relief.”
- “The amount of a profit or loss depended on discussions with an inspector which were not complete when the time limit expired, and the delay in agreeing on figures is not substantially the fault of the company or its agents.”
If you’re new to R&D tax credits and are concerned that you may have missed the opportunity to make a retrospective claim, then get in touch with one of our team who will be able to advise you on the best way forward.
We would also recommend reading our introduction to R&D tax credits to understand the scheme better or trying out our simple R&D tax credit calculator to estimate how much R&D credits you might receive.
Get in touch
At EmpowerRD, we know how difficult it is to navigate the complex world of R&D tax credits, which is why our team of chartered tax advisers use cutting-edge technology to provide a better R&D tax claims experience. We also make sure your claim is optimized and built fast, all at a fraction of the cost of traditional advisors.