Our recommendations to HMRC around R&D claim processing during the Covid-19 Emergency

We recently contacted the RDCC (HMRC’s R&D committee) which we attend to make some suggestions regarding R&D claims and the current emergency.

Many businesses are facing a cashflow crunch. R&D claims which lead to cash payments through either the refund of tax paid or the claiming of R&D Tax Credits or a payable RDEC are an important source of cash.

Our recommendations were.

1. Clear and regular updates on processing times. To enable firms to make cashflow decisions. Communication by phone is very hard right now with HMRC, and good email and online communications would make everyone’s lives easier.
2. If processing times do not meet the KPI standard of 95% in 28 days. Rather than letting a backlog build. Automate the claim process fully to keep the cash flowing to businesses. Even in normal times, last summer for example, processing has taken as much as 16-20 weeks. HMRC did improve this but it is a concern in these difficult times for business that delay in these payments may lead to companies going bust.
3. If point 2 is either technically not possible, or considered risky, bring in a process for companies to get interest free loans against filed R&D claims through banks and backed by the government. Loans are currently available commercially against R&D Tax Credit claims but these are very much a last resort and almost always require Directors personal guarantees and charge a significant rate of interest, they also take time to set up which can delay filing the claim in the first place.

HMRC UPDATE.

A fourth issue we will talk to them about is Time To Pay Arrangements TTP. At present if a TTP is made to for example defer 3 months of PAYE, and an R&D claim payment is made which is due to be paid out in the three months HMRC will offset this against what is owed so the PAYE debt is settled early. In these difficult times it would help companies if this ceased and they did not offset what is due through an R&D claim & treated other liabilities separately where an agreement has been made.

Update 02/04/2020 HMRC units helpfully and quickly confirmed to us that if you have a deferral agreement (TTP) with HMRC and an R&D claim is due to be paid while that is running they will pay the R&D claim in full and not offset..

All these suggestions are intended to help businesses navigate the Covid-19 emergency.

I hope to update this blog soon with news from the RDCC around how R&D claims will be handled in the coming weeks and months. If you need any advice don’t hesitate to contact us.