How Are R&D Tax Credits Paid?

How your R&D Tax Credit is paid depends on your financial situation and whether you’ve successfully optimised your claim.

R&D Tax Relief is a UK government scheme that incentivises companies to conduct R&D by lowering their corporation tax bill or providing a cash lump sum.

Through the scheme, you can claim up to 33% of the money you invest in qualifying R&D costs back as government funding. 

The average R&D Tax Credits payout was worth £88,000 last year – serious money that could catapult your business to new heights of growth. 

How are R&D Tax Credits paid?

R&D Tax Credits are paid as a cash credit, a reduction in your corporation tax liability, or as a rebate on tax you’ve already paid. Or, occasionally, a combination. 

Here’s a simple breakdown:

As relief on your corporation tax

If you’re profitable, and due to pay corporation tax, the R&D Tax Relief will decrease the amount of tax you have to pay.

If your tax relief is worth more than the amount of corporation tax you’re expected to pay, you’ll receive a cash credit for the difference.

As a cash credit

If you’re unprofitable and aren’t required to pay any corporation tax, you’ll receive the value of your R&D Tax Credits as a cash lump sum.

This is literally money that’s transferred into your bank account from HMRC.

As a tax rebate

If you’ve already paid your corporation tax for the period in which the R&D took place, you’ll receive a rebate.

This is essentially a refund on the tax you’ve paid.

This is a pretty common situation because companies can claim R&D Tax Credits up to two years after the fact.

One more thing

There is one other factor determining how you’ll receive your tax credits.

That’s whether an R&D Tax Credits consultancy has optimised your financial position.

Firms like GrantTree can use HMRC provisions like surrendering losses and enhancing expenditure, which harnesses your R&D expenditure to make your business artificially less profitable or exchange some of your losses – if they’re generated because of R&D spending – for cash.

This is perfectly legal and provides several useful benefits. 

Let GrantTree optimise your windfall

If you want to make sure you receive your funding in the form that best suits your company, it’s often a good idea to seek advice from an R&D Tax specialise like GrantTree.

Our team of tax specialists can structure your claim as a credit to unlock funding now or use it to offset your future tax liability if you expect to be profitable in the near future. 

They can also help you access your funding up to 12 months ahead of schedule.

To learn more about your options and discuss an upcoming claim, just get in touch

Download the Ultimate Guide to R&D Tax Relief

GrantTree’s guide offers step-by-step instructions for preparing a maximised, compliant claim.