Blogs/Vlogs

How to get your R&D tax credit faster

9 March 2020

HMRC dragging their heels on your R&D tax credit? Here’s how you can get the money quicker.

If you’re reading this, it’s more than likely that you already know about R&D tax credits. The investment into research and development (R&D) will help you innovate, increase productivity, and grow your start-up with a competitive advantage. The tax credit then provides you with a valuable cash inflow that works out as roughly 33% of the spend on R&D.

That said, we welcome this relief for UK businesses, but delays in paying out the relief can cause cash flow troubles for start-ups that are running low on cash. It can take up to six months to recover the funds (or longer if HMRC decide to investigate further). The process of filing, reviewing, approving and then receiving the funds means that its adoption can be limited to those who are able to fund the gap between start and finish if their R&D is to continue with acceleration.

Luckily, there is a way around this: 'funding the gap' by using the R&D tax credit as a receivable from HMRC. In this case, just like an outstanding invoice, the debtor acts an asset against which a business can borrow to raise funds. From a lender's perspective, presuming that the R&D tax credit report has been properly prepared and claimed, this is low risk due to the extreme unlikelihood of HMRC defaulting on the loan.

How much can you expect to borrow?

We can work with you to find the right lender. The majority will look at submitted claims, as there is an HMRC receivable with an expected receipt date. By that stage, the lender provides funding for a term of one to three months. Where you have already had two or more submissions, it is possible to receive funding on submission to enable a term of three to six months instead. If you are established as an R&D innovator, there are those who would be willing to lend based on your R&D spend up to six months prior to your submission. This would enable up to 12 months of lending on the basis of your R&D track record.

There are of course fees and interest on the loan to consider, but when the loan is received in advance of submitting the claim, it is possible to increase legitimate R&D spending with cash from the loan to gain an even bigger tax credit. This, in turn, should cover those fees and interest.

At UHY, we work with innovators every day who want to expand and develop their business without any red tape to slow the process. If you’d like to discuss your R&D tax credits and potential funding further, please contact me or your local UHY adviser.

Alternatively, please use our contact form.

Let's talk! Send an enquiry to your local UHY expert.