R&D tax claims for startups

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Companies normally make a claim under the UK’s Research and Development Tax Incentive Scheme within their end of accounting period company (CT600) tax return.

All companies that are engaged in business activities and therefore ‘trading’ are required to file an end of year CT600 tax return so this is not normally a problem.

However, what if you have a start up company and your business is engaged in pre-trading R&D activity that does not require a CT600 tax return to be filed – can you still make a claim under the R&D tax incentive then?

Short answer is: yes.

There is an election that your company can make to HM Revenue & Customs that deems the relevant qualifying expenditure to have been incurred in the period in ¬†which the expenditure was actually incurred (there are normally different rules for pre-trading expenditure for company tax purposes…!) which allows your company to claim the R&D tax relief and either:

  • claim a payment from HMRC in return for the surrender of the enhanced tax loss or
  • carry back the loss or
  • carry forward the surplus tax losses.

You have two years to make such an election following the end of the relevant accounting period.

So if you’re left scratching your head about how to file an R&D tax credit claim when you’re a pre-trading start up with no CT600 due – hopefully this helps.

You will of course need to establish eligibility of the projects and quantify the allowable costs in the normal way.