How far back can you claim R&D tax credits?
R&D tax credits reward innovative companies that perform scientific or technological-based activities as part of a project that aims to push the envelope in terms of the established knowledge in the field.
If your team has been conducting work on potential products or services in recent years and have only recently stumbled across the concept of R&D tax credits, you might be concerned that you’ve missed the boat to make a claim.
The good news is that it is possible to retrospectively file R&D tax credit claims with HM Revenue and Customs (HMRC).
What is the permitted time limit for submitting retrospective R&D tax credit claims?
Large and small companies have two years from the end of their accounting period to file a claim for R&D tax credits spanning all qualifying expenditure outlaid throughout this timeframe.
As R&D tax relief is a form of Corporation Tax relief, it makes sense that the retrospective time limit is the same as the one given to businesses to amend Corporation Tax returns – in this case, a maximum period spanning 24 months in the past.
Let’s take a look at a working example:
If your company has a year-end date of 31st December 2018, you would be able to submit retrospective R&D tax relief claims for research projects carried out within the following accounting periods:
- 31st December 2016 – time limit expires on 31st December 2018
- 31st December 207 – time limit expires on 31st December 2019
In simple terms, this means that R&D projects that were undertaken as far back as January 2016 (in the December 2016 case) remain valid to claim for enhanced R&D tax relief.
What types of R&D expenditure can you claim for?
If your R&D project meets the eligibility criteria above, you can subsequently claim for the following expenses generated throughout:
- Staffing costs of full-time employees, spanning salaries, employer National Insurance contributions (NICs) and pension contributions
- The cost of hiring freelancers and subcontractors to help undertake the project
- The outlay for some types of industry software
- The cost of consumables and materials ‘used up or transformed by the R&D process’ e.g. power, heat and light