R&D tax relief claimants – important update for clients with a December year-end date
For years, companies have been able to claim R&D tax relief retrospectively for two accounting periods. For example, a company can make a claim for an accounting period ended 31 December 2023 as long as it makes the claim by 31 December 2025.
For accounting periods beginning on or after 1 April 2024, the window for making a claim has been reduced dramatically; for claimants who have not previously claimed R&D tax relief, or have not made a claim for (broadly) three years, the time limit for notifying intention for making a claim is just six months. This means that, even if a claim is made within two years of the accounting period end in the usual way, the claim would not be valid without an “advanced notification” being filed in time.
The rules above bring about a bizarre situation where a company with a December accounting period end who has not claimed relief before can, as it stands today, make a claim for the 2023 year, cannot make a claim for 2024 but can then claim again in 2025 and subsequent years.
If a company has made a claim in the last few years, it may be that a pre-notification is not required for 2024, but the rules governing this entitlement are not straightforward. It is worth speaking to a tax professional to establish when the last R&D claim was filed and whether this was an original filing or made via an amended return.
If you can’t make a claim for 2024, the good news is that the rates are generally beneficial for SMEs in the 2023 period.
A profitable company making an R&D claim in 2023 that spends £100,000 on R&D would obtain additional relief of up to £22,289 (ignoring marginal relief), compared to a maximum of £21,500 if the same amount was spent in 2024.
For companies that are loss making, spending £100,000 on R&D in 2023 would generate a maximum payable credit of £22,237, compared to £18,600 if the same was spent in 2024. For “R&D-intensive” SMEs (broadly companies who expend more than 30%/40% of resources on R&D), these maximums increase to £28,543 and £26,970 in 2023 and 2024 respectively.
Bearing this in mind, if you have a December year-end it is definitely worth acting now to ensure that you don’t miss out. For tailored advice regarding your situation, please get in touch – we’re here to help!
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