Will HMRC offset my R&D tax credit against other taxes I owe?

In some circumstances, yes. Repayments of tax and payments of tax credits arising from R&D claims are subject to legislation enabling HMRC to offset the amount due against tax owed before paying you any remaining balance.

Tax credits

If a company claims a payable R&D tax credit, HMRC will pay the amount claimed in respect of the credit unless:

• The company has other outstanding debts to HMRC, including Corporation Tax, PAYE, NIC and, in some circumstances, VAT.
  
  Any surplus R&D tax credit due after clearing any other HMRC debt can be paid.

• An enquiry is opened into the company’s return for the accounting period for which the R&D tax relief is claimed.
  
  Here payment may be withheld until the enquiry is completed, although it is possible for HMRC to part-pay an R&D tax credit during an enquiry if appropriate.

If you are behind on your tax liabilities, HMRC may keep some of your tax credit to settle these arrears before paying you the balance.

The good news is that HMRC won’t keep your credit to offset an upcoming liability, offsets are only based on what you owe on the date they process the claim (find out more about how long it takes to process a claim).

Refunds of Corporation Tax

Sometimes your R&D claim will result in a refund of Corporation Tax you have already paid. If you are due a refund of Corporation Tax, HMRC will first check whether you owe any other taxes before processing your refund. If you do, they will use all or part of the refund due to sette those other debts.

Time to pay arrangements

Time to pay (TTP) is an agreement entered into between a taxpayer and HMRC which delays enforcement proceedings for a given debt to a specified future date. TTP is akin to a payment plan with a creditor, but it does not stop the liability from being owed.

Where a TTP arrangement is in place, HMRC will typically set any R&D tax credit or repayment due against the TTP liability, regardless of the timings you have previously agreed as part of the TTP process.