For businesses looking for an extra injection of cash, research and development (R&D) provides an avenue well worth exploring.
Why? Well, in an effort to incentivise British businesses to spearhead innovation and evolution in their relevant industries, the UK government’s R&D tax relief scheme offers financial support to subsidise some of the associated costs of any qualifying R&D project.
For many businesses, the advantages here are twofold: pursue innovations that could see your sales or profit margins skyrocket, while mitigating financial risk. The very definition of win-win.
Eligible R&D projects must satisfy a range of criteria, but the scope here is wide – including both external innovations to products and tools and internal innovations to processes and methods.
With all of this considered, it’s possible your business has already conducted qualifying R&D activity, meaning you may be entitled to funding.
But can you file retrospective claims for R&D? If so, how far back can you claim? And what records would you need to have at your disposal? Let’s explore…
The short answer is yes!
You can file a retrospective claim for R&D tax credits if you’ve carried out an eligible R&D project within a 24-month window from the end of your accounting period.
R&D tax credits are a form of Corporation Tax relief and are therefore subject to similar time constraints to that of Corporation Tax returns.
You can claim back eligible expenses on any qualifying R&D activity for up to two years preceding the end of your accounting period. It’s important to note that this deadline includes the submission of your claim, so be sure you’ve identified and filed any expenditure within this time.
Accounting periods are usually 12 months long. So, for example, if your company’s year-end is 31 March, you have until 31 March 2021 to claim R&D tax relief on any qualifying projects backdating to the year end 31 March 2019.
If you’re the organised sort, perhaps you’ve already filed your company tax returns for the year. Not to worry! If you’ve already filed your accounts for a period for which you now wish to claim R&D tax relief, as long as you’re still working within the qualifying time frames mentioned above, you can simply file a CT600 amended company tax return with your R&D claims included.
Though formal record keeping isn’t a necessary requirement for R&D tax credit eligibility, it certainly helps – especially in instances of retrospective claims
Regardless of how thorough your financial record book is, you’ll need to be able to provide empirical evidence of any associated costs you wish to claim. The scope for expenditure you can claim back on is broad – the key is to be able to demonstrate how those costs contributed to qualifying R&D activity.
Think you’re entitled to a retrospective R&D tax credit claim? Get in touch with the experts at Lumo today.
We’ll happily guide you through every step of the process.
By Lumo Tax