The end of December and March are important dates in the R&D tax credit calendar.
That’s when most companies arrive at their accounting year end and they are Catax’s busiest times of the year.
If you normally leave your tax credit claim to the last minute, you are not alone but there are really good reasons why you shouldn’t.
Cashflow
HMRC doesn’t pay out tax credit claims all in one go. The later you leave your claim, the longer you have to wait for that money. Put in an early claim and you can put it to good use much sooner.
Processing times
HMRC only has finite resources to process claims. Checks for fraud and error are increasing and this has recently meant companies have been warned they’ll probably be waiting longer than in the past. By filing your claim close to these two key dates in the accounting calendar, you join the back of a very long line. Depending on the size and type of claim, the turnaround time can take much longer, a few weeks or even months, if you leave it to the last minute.
Misconceptions
Some companies think that by filing at the last minute, it’s less likely their claim will be scrutinised. There’s no evidence for this, and if checks are something you’re worried about then you’re with the wrong adviser.
Record-keeping
Getting organised means there’s less chance a hole in your record-keeping won’t be filled in time.
HMRC doesn’t insist companies keep separate R&D costings, but there are ways of ensuring no qualifying costs are missed.
At the very least, we want to see payroll records and example invoices for materials, subcontractors and software, plus copies of expense claims for reimbursed expenditure. The more accurate the records are, the more robust the financial aspects of a claim.
Larger entities, or those with previous R&D tax relief claims, may be expected to keep better R&D records. This does not necessarily require a new book-keeping system, but can involve keeping timesheets for R&D projects, or posting materials invoices to a job costing system that relates to a particular project.
When to make a claim
Most businesses have all the information they need to make an early claim. The best time to do that, if a claim hasn’t been made already, is between mid-November and early December for a December year end.
And don’t forget. By claiming early, your adviser has more time to explore any issues that could improve your claim, and get you everything you’re entitled to. If there’s no time to ask questions and make further investigations, that could cost you.