Understanding R&D Tax Credits: How Far Back Can I Claim?
19 September 2024
Don’t run out the clock on your R&D claim, instead, understand how you can form a compliant claim that awards you significant financial benefits. Examine the facts about R&D tax credits, the time constraints imposed by HMRC, and follow our 3 step process to prepare your claim.
When it comes to R&D tax credits, timing is crucial. Not only do HMRC set time limits for first time claimants, but each claim must adhere to specific deadlines in accordance with their own accounting period.
When seeking out information on these deadlines, the language can sometimes seem a little complicated however. So instead of spending hours trying to make sense of the government guidelines, we’ve simplified the material to present you with a direct insight into the time limits and deadlines that you need to know.
Understanding R&D Tax Credits
After its introduction in the year 2000, the R&D tax credit incentive has empowered businesses throughout the UK to invest in innovation. Initially the incentive was available only to small and medium sized enterprises (SMEs), but as of 2002 has been opened up to large companies, forming two primary schemes:
- SME scheme
Available for businesses with fewer than 500 employees and either an annual turnover under €100 million, or a balance sheet under €86 million - RDEC
Available to large companies with 500+ employees and SMEs with subcontracted R&D that doesn’t meet specific qualifying criteria under the SME scheme
In order to qualify for R&D tax credits, businesses must ensure that their projects fit HMRC’s definition of research and development. That is to say that qualifying research and development projects are those that aim to achieve an advancement in science or technology by resolving uncertainties that could not be overcome by an expert in the field.
In order to understand more about R&D tax credits and whether your research and development project meets the eligibility criteria, book your call with one of specialist consultants.
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Time Limits for Claiming R&D Tax Credits
Understanding the time limits and deadlines of R&D tax credits is one of the most important aspects of the claims process, and at present there are two that you need to keep in mind when preparing to make a claim.
Firstly, you need to understand the claim notification deadline. As of April 1st 2023, businesses looking to make a claim must notify HMRC of their intention to claim R&D tax credits if:
- They have not claimed R&D tax relief in the previous three years.
- They are claiming for the first time
Businesses making a claim notification must do this within six months of the end of their accounting period.
Secondly, you have to understand the time limits involved in claiming the tax relief. Aligning with the deadline for a corporate tax return (CT600), the time limit for claiming R&D tax credits is two years from the end of the accounting period during which the research and development project occurred.
Example of the R&D Tax Credits Time Limit
In order to simplify the time limits for claiming R&D tax credits, we wanted to provide a visual representation of accounting periods, so the following table image highlights examples of accounting period end dates, and the final deadline for their R&D claim.
3 Ways to Prepare Your R&D Tax Credit Claim
When looking to make an R&D tax credit claim, there are a few things that you should prepare beforehand in order to maximise the potential financial benefit of your claim. We’ve broken down what you should prepare into these 3 simple steps.
Step One: Identify Your Qualifying Factors
Before making your claim, you must first establish your qualifying activities. These are the actions that you took throughout your project in order to overcome the identified uncertainties, and that adhere to the following criteria:
- Activity should aim to advance knowledge or capability
- Activity must seek to resolve industry related uncertainties
- Activity should be conducted using a systematic approach
- Activity should not be easily replicated
Prior to identifying your qualifying activities, you’re required to identify the qualifying expenditure associated with each activity. These costs include:
- Direct staff costs (such as PAYE, NIC and pension contributions)
- Consumable item costs
- Software used directly in R&D
- Test stage prototype costs
By identifying the qualifying factors in this order, you may be able to maximise the extent of the financial benefits received from R&D tax credits.
Step Two: Gathering Documentation
Your documentation is what certifies your R&D claim. The documents that you gather should be able to present a timeline of your project, and certify your qualifying expenditure, some of which include:
- Project reports
- Employee time sheets
- R&D related financial reports
Step Three: Organising Your R&D Claim for Each Accounting Period
Many research and development projects span across a variety of years, necessitating more than one claim. For this reason, it is imperative that you organise your project documentation for each accounting period.
By organising your claim for each accounting period, not only will you be able to make the claims process more efficient, but you’ll also be able to prepare for any potential HMRC enquiries.
How Alexander Clifford Can Further Maximise Your Claim
Known for their efficiency and expert insights into HMRC policy, our specialist team is dedicated to ensuring that your claim is compliant and rewarding.
As leading R&D tax credit specialists, the team at Alexander Clifford have compiled and submitted over 2,400 claims on behalf of our clients, resulting in an average financial benefit of over £50,000.
That’s what makes Alexander Clifford your trusted choice for R&D tax credits.
To discover how we can aid in supporting your claim, fill in the contact form below and one of our specialists will contact you within 15 minutes.
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