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How Far Back Can You Claim R&D Tax Credits?

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Companies operating at a loss can carry their R&D tax credits forward a year (if they expect to make a profit in the following year), so they can offset their corporate tax contribution. However, companies can also claim tax credits for R&D projects they’ve carried out in previous years – in this article, discover how far back you can claim R&D tax credits. 

Can R&D credits be carried back

Businesses that are a part of the SME and RDEC scheme can carry back R&D tax credits. A financial year for a business is usually around 12 months long, typically from 31st March to 1st April. 

Businesses are able to amend their Corporation Tax return two years after the end of their financial year, and as R&D tax credits offset corporate tax, this means you can claim R&D credits up to 2 years after the end of your accounting period. For example, if you wanted to claim tax credits for an R&D project you carried out between 1st April 2021 – 31st March 2022, you have until 31st March 2024 to make your claim. 

Are there any other time limits?

It depends on whether the company has claimed R&D tax credits before.  If you have claimed for any of the previous three accounting years, then there are no other limits.  However, if you haven’t claimed in that window, then you need to notify HMRC within 6 months of the end of your accounting year that you intend to claim.  

This notification is a very simple process, and you don’t need to say anything about what the R&D is or how much you will claim, but it is essential for the claim to be valid.

Can you extend your business’ accounting period?

Companies can change their accounting periods to when an R&D project took place, they can either extend their accounting period by 18 months or they can shorten it to access their claim sooner. Through the R&D advance funding scheme, businesses can get 80% of their claim from the HMRC up to 9 months before they’re due to receive their tax credit. 

Can new companies claim tax credits for their R&D projects?

Yes – a new business’ financial year is automatically set for the date they registered their business, but they will change this to dates like the 31st March to make accounting easier. This may lead to the first few accounting years not adding up to 24 months, but this does not affect when you claim R&D tax credits – it’s still 2 years from the end of an accounting period. 

Can you make a claim after the 2 year window?

After the 2 year window has passed, you won’t be able to claim R&D tax credits, however, the HMRC does allow certain businesses to make a claim if they were unable to during the allotted timeframe. The Statement of Practice 5 states that businesses can make an R&D claim outside of the specified timeframe if they fall into these categories: 

  1. “At the date of the expiry of the time limit, the company or its agents were unaware of profits against which the company could claim relief.”
  2. “The amount of a profit or loss depended on discussions with an inspector which were not complete when the time limit expired, and the delay in agreeing on figures is not substantially the fault of the company or its agents.”

How Ayming can help

Ayming is Europe’s number one R&D incentives advisor with over 20,000 clients all over the world. Our experienced R&D credit experts take time to understand the technicalities of your R&D projects, so they can help you identify your qualifying expenditure and make the most of your R&D claim – speak to our experts today to get started.