Hand on laptop and desk

Can I make an R&D tax relief claim without finalising my accounts?

Richard Lupson-Darnell, Senior Manager, Corporate Tax
Hand on laptop and desk

Once a company is in a position where they can demonstrate they are undertaking qualifying R&D projects, the mechanism for unlocking valuable R&D tax credits is by claiming through the corporation tax self-assessment system. This requires a Corporation Tax return to be filed, which is only valid if accompanied by a Corporation Tax computation and the statutory financial statements for the relevant accounting period.

Without all those elements being in place, a claim is normally not possible. However, what if approval of the accounts by the directors is delayed due to unforeseen reasons?

By way of example, say the statutory financial accounts of a company are otherwise very close to finalisation but a claim that has just been lodged by an external company for a payment to be made by the company. As a result, the company needs to take proper time to review the claim to determine its validity, meaning it is reluctant to finalise the accounts for commercial and business sensitivity reasons.

The company’s R&D claim will put it in a repayment position, and the claim against it will not affect the amount of the R&D claim. Therefore the company would naturally like to proceed with submitting a claim for a repayment, which will ease their cashflow position at the current time.

Will HMRC accept a claim without the signed statutory financial statements?

In other situations HMRC has indicated that they will currently accept claims ahead of the normal filing process, for example where a company can clearly demonstrate they have incurred current year losses. Good evidence is required but provided that meets the required standard, HMRC is open to claims against the previous year’s taxable profits before normal filing requirements are met.

It would seem reasonable therefore for a company wanting to submit an early claim for R&D tax credits in the circumstances set out above to do so. However it is important to consider whether there is provision either within the R&D rules, or based on HMRC’s approach during the COVID-19 pandemic, for HMRC to accept an R&D claim and make payment of the tax credit under the SME scheme where there are draft, but very near completion, financial statements. The company would of course also submit its Corporation Tax return based on those draft accounts, accompanied by the required R&D technical report.   

HMRC has clarified that the legislation requires a set of final accounts be submitted, as an R&D claim can only be made in a Corporation Tax return, which itself is only valid if accompanied by the final statutory accounts. They have not adopted a different approach and so an early claim in the circumstances set out above would not be valid.

For more information, contact Richard Lupson-Darnell or your usual Crowe contact. Visit our dedicated R&D tax incentives page for more information about how you can submit an R&D tax relief claim.

Contact us

Stuart Weekes
Stuart Weekes
Partner, Corporate Tax
Thames Valley