Companies who invest time and resources in advancing technological or scientific capabilities through the resolution of technological and/or scientific uncertainties may be eligible for R&D tax relief subject to meeting specific conditions.

The relief will either reduce companies' tax liability or, if a company is loss making, provide a cash sum in the form of an R&D tax credit, the amount of which will depend on the level of qualifying expenditure incurred in a given accounting period. The type of relief will vary between SMEs and large companies. 

Historically, HMRC have been able to process and pay out R&D tax credits within four to six weeks from the date of the tax return submission. While HMRC remain committed to a 28-day turnaround time in terms of processing R&D claims, they are currently experiencing a significant backlog. The delay has reached three months for SME R&D claims i.e. claims submitted up to the beginning of April 2019. For Research and Development Expenditure Credit (RDEC) claims, the process is taking six months (as of 2 July 2019). 

Given that there was a similar accumulation of claims around the same time last year, this may be a seasonal blip caused by the influx of December and March year-end tax returns. Despite professional bodies having expressed their concern and having queried the reasons and time frame for resolution of the delays, HMRC have not yet identified when they expect to be able to meet their target. As a result it may be the case that this three-month delay will be in place for an extended period of time. 

Regardless of whether this will result in a seasonal trend, we would recommend companies looking to take advantage of the R&D relief, reach out to their haysmacintyre contact and plan for early tax return submissions where possible, to avoid lengthy delays in repayable tax credits. Where the tax compliance work cannot be moved forward, it is advisable that companies spend time collating their R&D project documentation and discuss their projects with their tax adviser before or at the time of their tax compliance process in order to ensure that the R&D claim is submitted as early as possible.