HMRC aims to process research and development (R&D) tax credit claims for SMEs within 28 days. However, the length of time it takes for HMRC to review an R&D tax credit claim will depend on the complexity of your structure and accounts, as well as the nature of the claim itself. It may also depend on what time of year your claim is submitted.
The main factor in determining how long it takes HMRC to review an R&D tax credit claim is whether you are an SME or large company.
If you are an SME, HMRC provides guidance and insight into how they will deal with a claim in their general practice note. The guidance says that HMRC aims to process R&D tax credit claims within 28 days. So if you make an R&D tax credit claim, you can expect it to be reviewed and paid out pretty quickly.
However, as with most businesses, the speed at which claims are reviewed by HMRC depends on availability of resources and workloads. Claims filed over the Christmas, Easter, and summer months may take longer than those filed outside of these seasons due to annual holidays. Additionally, the peak periods for company financial year-ends, such as March, September and December, may also take a little longer due to the volume of claims being processed.
A review also depends on how complex the claim is: the length of its supporting report, and if the company has any other special areas of risk that HMRC may need to consider. A claim is part of the company’s tax return and therefore it may not be looked at in isolation; the VAT, PAYE and tax affairs of the company may all be considered as well.
The seasonal peaks and review processes are mostly the same for large companies. But claims for large companies usually take longer to review. Often because these are inevitably part of more complex Corporation Tax returns. These longer review periods are more likely if the company has other specialist areas, such as transfer-pricing, that need to be considered when reviewing the Corporation Tax return for the whole year.
What happens where an R&D tax credit claim is made after a company’s Corporation Tax due date?
Where an R&D tax credit claim is made after the company’s Corporation Tax due date, assuming tax has been paid, HMRC will need to generate a refund when the claim is processed. However, if the R&D tax credit claim is finalized and submitted with the tax return prior to the tax due date (typically nine months and one day after the end of the accounting period), the company can ensure it pays the correct amount in the first instance. For companies paying tax in quarterly instalments, proper planning of the R&D claim preparation can have a positive impact on cash flow.