Does making an R&D tax credit claim always have a positive impact on cash flow?

For profitable companies, R&D tax relief will generally have a positive impact on cash flow by reducing the amount of Corporation Tax payable.

For loss-making companies, the position can be more complex. Depending on the company’s circumstances and the relief available, the value of an R&D claim may be realised through a payable credit, a reduction in future tax liabilities, or a combination of both.

Therefore, it’s important to take into account that the immediate cash benefit of an R&D claim may not always represent the most valuable outcome for your situation. Sometimes preserving or increasing losses can be just as valuable as obtaining cash, particularly where those losses may be available for relief against future profits.

The optimal outcome will often depend on the wider tax position of the company. Factors such as future profitability, available reliefs and the intended use of carried-forward losses can all influence how valuable a claim is in practice.

This means that the cash value received from an R&D claim does not always tell the full story. In some circumstances, a company may choose to prioritise future tax savings over an immediate cash benefit.

Qualifying loss-making R&D-intensive SMEs may be eligible for Enhanced R&D Intensive Support (ERIS), which provides a higher level of support than the merged R&D scheme. Whether the immediate cash benefit or future tax relief is more valuable will depend on the company’s wider financial position and future plans.