Taxation logo taxation mission text

Since 1927 the leading authority on tax law, practice and administration

Update for R&D time limits

04 December 2007
Categories: News , Companies
Claims to research and development tax relief for accounting periods ending before 31 March 2006 must be made by 31 March 2008

In a move to simplify the claims process, it was decided to align the time limits rules for claiming R&D relief across the various schemes.

This was done in FA 2006 which introduced amendments to the existing claims rules.

As a result, for accounting periods ending on or after 31 March 2006, all claims to research and development tax relief, including vaccine research relief, must now be made in a tax return and are subject to the normal corporation tax self assessment time limits for making, amending and withdrawing claims.

When the time limits were changed, a transitional period was introduced to give companies time to make their enhanced deduction claims for past years.

The transitional period covers accounting periods ending after 31 March 2002 but before 31 March 2006 and runs until 31 March 2008.

This means that all claims to research and development tax relief for the accounting periods covered by the transitional period must be made by 31 March 2008.

If 31 March 2008 is looming, HMRC will accept tax returns, or amended returns for those accounting periods for which the company is still in time to amend its return, containing provisional research and development claim figures.

The same approach will apply to companies making enhanced claims for which it is too late to submit an amended return.

However, a return or claim including a provisional figure should only be made once it is clear that the precise figure will not be available before the filing date or the expiry of the time limit relevant to the claim.

Any transitional period research and development claims received after the 31 March 2008 time limit will be dealt with, whether made in a return or not, in accordance with Statement of Practice 5/01.

HMRC add that for accounting periods ending before 31 March 2006, the longer time limit for claims for research and development relief does not mean that other claim time limits are extended.

So if a claim for an enhanced deduction from profits is made outside the normal time limits for group relief, then any resulting increase in losses cannot be surrendered as group relief, unless the claimant company is still in time to claim under normal group relief time limits in FA 1998, Sch 18 para 74(1).

'With the upcoming changes it is essential that advisers review their client databases for any companies which may previously have slipped through the net and could be eligible to make an R&D claim, for example new clients whose previous advisers may not have discussed the issue with them', said Stephen Charles of Hawsons.

'Companies which are very far removed from the typical research based industries can be incurring qualifying expenditure and so it is worthwhile reminding clients of the relief in newsletters or other marketing material — perhaps a suitably designed Christmas card.'


Sections - corporation tax

Categories: News , Companies
back to top icon