How will I receive my R&D tax credits?

The way you receive your R&D tax credit payment depends on the scheme in which your claim falls under, and the current financial position of your business.

Businesses typically receive R&D tax relief in one or more of the following ways:

• A cash payment from HMRC.
• A reduction in their Corporation Tax bill.
• Carrying tax losses forward or, where available, back to another accounting period.
• A combination of the above.

If your company is profitable, the relief will usually reduce the amount of Corporation Tax you pay. If your company is loss-making, you may be able to receive a cash payment or use the losses to reduce future tax liabilities, depending on the rules that apply to your claim.

For accounting periods covered by the former SME scheme, profitable businesses generally received enhanced tax deductions, while eligible loss-making companies could surrender qualifying losses for a payable tax credit. For more recent accounting periods, most claims fall under the merged R&D scheme, with different rules applying to eligible R&D-intensive SMEs.

Once HMRC has processed your claim, any repayment due will usually be paid directly into your company’s nominated bank account. If the relief is being used to reduce your Corporation Tax liability or offset losses, this will be reflected in your Corporation Tax position rather than as a separate payment.