If you’ve just finished your financial year and are planning to apply for R&D Tax Relief, there’s something you need to be aware of.
From April, HMRC’s processing times for R&D claims are going to shoot through the roof. This happens every year, but there’s reason to believe 2024’s ‘spring slog’, as we’ve come to call it, will be worse than ever before, with companies waiting up to three times longer to receive their funding.
Why does the Spring Slog happen?
The reason for the spring slog – or HMRC slowdown, as the phenomenon is more commonly known – is simple: between April and June, the agency is inundated with tax submissions. Not just R&D Tax claims but the whole gamut of personal and corporate returns, all contributing to a deluge of paperwork that quickly overwhelms the agency’s hardworking inspectors.
Spring is an especially busy time for R&D Tax filings. December is a popular month for year ends, and companies often submit their R&D Tax claims four to six months after they’ve closed their books.
Companies can and regularly do file their R&D Tax claims faster so they can access their funding sooner. This is something we advise our clients to do. However, many opt to file later in the year or are forced to do so by inactive providers and other circumstances. This leads to a peak in submissions between April and June.
This year will be worse than before
The spring splog is an annual occurrence, but it’s likely to be far worse this year. That’s because R&D Tax claims now take much longer to process.
There are two reasons for this.
The first is that HMRC inspectors have to make sure all claims comply with the raft of changes the government has made to the scheme over the last 12 months, including the introduction of new relief rates, claim requirements, and the R&D-intensive regime for loss-making SMEs. This is time-consuming work.
Claims that are judged not to be aligned with the latest legislation are being subjected to an arsenal of compliance measures, ranging from instant rejection to lengthy, reputation-damaging investigations.
The second reason is that inspectors now have much more data to analyse.
As of 8 August, all companies must submit an additional information form containing detailed financial and technical data about their development work. Processing this data and comparing it against the scheme’s complex eligibility criteria takes time, with obvious consequences for the mid-year slowdown.
The introduction of the additional information form is a positive step in that it helps inspectors intercept non-compliant claims, which, according to HMRC, now account for half of all submissions. While this seems a little high, the fact remains that the proportion of claims containing ineligible costs and projects has risen steeply over the last few years, thanks in large part to the rise of unscrupulous R&D Tax shops posing as experts.
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How you can avoid HMRC’s slowdown
The only way to avoid the HMRC slowdown and get your claim paid out quickly is to file before the end of March. It’s that simple: Either you file your claim before April, or you run the risk of having to wait three times longer to receive your funding.
If your financial year ends in November, December, or January, you should be able to file a fully compliant claim, inclusive of all qualifying costs, before 31 March and avoid the worst of the slog. However, this depends on your R&D Tax provider being willing and able to move quickly. Time and time again, I speak to companies from whom this is not the case; where their provider, be it a corporate accountant a so-called specialist, isn’t willing or lacks the capacity to prepare their claim in good time.
If your provider isn’t able to get your claim filed in time, GrantTree’s R&D Tax team is here to help. We can prepare your claim in as little as two weeks, provided we have all the necessary data. Unlike generalist accountants, we’ll also make sure your claim complies with the whirlwind of recent changes, protecting your business, funding, and reputation from a lengthy, time-consuming enquiry.
The added protection only a specialist like GrantTree can offer has never been more important. HMRC has been coming down hard on non-compliant claims, so much so that the Chartered Institute of Taxation cited the agency for an abuse of power. If you want to avoid this kind of trouble and receive your full entitlement in good time, just get in touch.