For standard R&D Tax Credits, HMRC aim to process and pay out claims within 6-8 weeks. However, and particularly in recent months, we’ve seen payment delays stretch to 12+ weeks as HMRC increase their compliance efforts.
Whilst this is necessary to tackle occurrences of fraud within the R&D Tax Credit scheme, this also causes frustration for legitimate R&D Tax Credit claimants by preventing them from receiving their cash or tax benefit in a timely manner.
For many innovative businesses, R&D Tax Credits are crucial to support further development, and R&D claims being withheld can force entrepreneurs to put their project on hold.
To provide a solution for businesses with a more urgent deadline on receiving their R&D claim, Claim Capital offers R&D Advance Funding.
What is R&D Advance Funding?
R&D Advance Funding is essentially a short-term loan on your future R&D Tax Credit benefit, which allows claimants to skip the HMRC processing queue.
Rather than rolling the dice when it comes to HMRC’s processing period, Claim Capital can advance 80% of your R&D claim value as soon as we submit it to HMRC. Once HMRC has processed and paid your claim, you can simply pay us back the advancement plus any incurred fees.
In summary, R&D Advance Funding can give you access to up to 80% of your future R&D Tax Credit benefit up to 9 months before receiving payment from HMRC.
How does R&D Advance Funding work?
Firstly, it’s worth noting that R&D Advance Funding is not directly offered by many R&D Tax Advisors. Instead, it’s commonplace for R&D Tax Advisors to outsource the advance loan to a referred partner and focus solely on completing the R&D claim.
Claim Capital is one of the only R&D Tax Advisors to directly provide R&D Advance Funding to businesses. There are several advantages of this for the claimant, such as the fact that the necessary due diligence process required for advance funding is simultaneously carried out whilst we’re completing your R&D Tax Credit claim. This speeds things up and prevents the need for an external funding partner to conduct compliance checks.
An additional advantage of accessing R&D Advance Funding directly through an R&D Tax Advisor like Claim Capital is the fact that we don’t carry the same constraints as funds that require security over the R&D claim. For a funding partner to obtain this, they must receive signoff from shareholders. We don’t have these issues because we lend directly to the R&D Tax Credit claimant.
These differences mean that Claim Capital can deliver R&D Advance Funding within 2-3 days, in contrast to the typical 5-10 days exhibited by non-direct funds.
To qualify for R&D Advance Funding, you will need to have previously filed two successful R&D Tax Credit claims. However, for companies who have only filed one R&D claim previously, some R&D Advance Funding bodies – such as Claim Capital - might consider proceeding on a case-by-case basis.
At present, there is no cap on the size of your potential R&D Advance loan. Typically, to qualify for R&D Advance Funding, the size of your R&D tax benefit should be substantial – we tend to fund businesses that are due to receive no less than £50,000 from their R&D claim.
Claim Capital’s R&D Advance Funding service works by completing your R&D Tax Credit claim as standard, and then advancing 80% of the total claim value, minus any liabilities you might have – such as VAT or PAYE.
So, for an R&D claim valued at £100,000, we can directly advance £80,000 of that sum.
But if your R&D claim is valued at £100,000, and you owe £10,000 in PAYE liabilities, we would be able to loan £72,000 (80% of £90,000).
Just as with any form of debt financing, R&D Advance Funding entails full repayment plus interest. The interest on advancement for Claim Capital is 8% with a personal guarantee, and 12% without a personal guarantee.
A personal guarantee is an agreement between the business owner and the lender, assuring that the individual who signs is responsible for repaying the loan should the business fail to make payments.
Our R&D Advance Funding interest rate is fixed for six months, which provides businesses with the security that if their R&D claim is randomly selected for enquiry, their owed interest won’t be increasing whilst our R&D Tax Specialists reach enquiry resolution.
With other R&D Advance Funds, the interest rate gradually increases within this six-month window, meaning that often, businesses are incurring greater fees due to an enquiry that is out of their control.
Claim Capital's R&D Advance Funding Service
As an R&D Advance Fund and an R&D Tax Credit Specialist, we’ve streamlined the process to account for unexpected circumstances that might arise in the R&D claim process – especially now that HMRC have ramped up compliance checks.
If your business could benefit from immediate access to your R&D Tax Credit benefit, and you fit the above criteria for R&D Advance Funding, reach out to our team of R&D Tax Specialists.
Our comprehensive expertise with the entire R&D claim process enables us to discuss your options as well as how we can help you secure a significant advance on your R&D Tax Relief.