Research and Development (R&D) relief is a great way to encourage innovation and reduce your corporation tax bill — but how far back can you claim R&D tax credits?
How far back can you claim R&D tax credits?
Companies can claim R&D tax credits up to two years after the end of the accounting period it relates to. This is in line with the typical 24-month deadline for amending your corporation tax return.
Let’s say you conducted your R&D activities between November 2020 and February 2021 and your company’s accounting period runs from 1 April to 31 March each year.
In this case, the relevant accounting period ended on 31 March 2021. You’ll therefore have until midnight on 31 March 2023 to claim your R&D tax credits on your corporation tax return — exactly two years later.
The same time limit applies if your company made a loss and is due to receive R&D cash credits.
Accounting periods
Your company’s accounting period will usually start on the date you registered the business with Company’s House, but you can change your company’s year end if you prefer.
If you do this, the deadline for adjusting your corporation tax returns will usually change along with your year end. As a result, you may be able to extend the amount of time you have to claim R&D tax credits.
While you can shorten your financial year as many times as you like, most companies can only lengthen it:
- once every 5 years
- to a maximum of 18 months.
You can only change the current financial period your company is in or the one immediately before it.
Startups
Some startups change their accounting period to a more convenient date (such as 31 March) within the first year of doing business.
If you do this, your first two accounting periods may not add up to 24 months. This is worth keeping in mind if you’re planning on conducting any R&D projects in this time.
Exceptions to the rule
In rare cases, HMRC may extend the two-year time limit when R&D claims could not have been made within the usual timeframe “for reasons beyond the company’s control”.
In other instances, you may have an ongoing R&D project that started before the earliest period you can claim for.
If this happens you’ll still be able to make a claim — so long as you were still trying to resolve a scientific or technological uncertainty during your last two accounting periods.
Upcoming changes
From 1 April 2023, companies will need to inform HMRC of their intention to file an R&D claim no later than six months after the end of the relevant accounting period if:
- the relevant accounting period started on or after 1 April 2023;
- the company has not made an R&D claim in the past three calendar years.
As a result, new claimants to R&D will need to act fast to take advantage of the relief.
If you need help claiming R&D tax credits, look no further. As corporation tax experts, we can advise you on everything from adjusting your accounting period to claiming for all eligible R&D projects and activities.
Want to know more about how far back you can claim R&D tax credits? Contact us to get expert tax advice today.