U.K. Taxman’s Delays Put Pressure on Brexit-Hit Companies

(Bloomberg) -- U.K. companies are facing delays of six months and more in getting credits from the country's tax authority, putting additional pressure on them amid the uncertainty of Brexit.

Unpaid claims worth tens of thousands of pounds from two research and development programs stretch as far back as December, according to Mike Baker of Jumpstart, which helps businesses apply for R&D tax relief. They should be processed in 28 days, he said.

The snarl-up threatens to particularly affect small and medium-sized companies because many exist “hand-to-mouth” during their expansion phase, when they are ramping up R&D expenditure, according to Seamus Nevin, chief economist at Make U.K., the industry association for British manufacturers.

“They need a consistent flow of cash coming into the company, so having to wait months at a time to access government tax credits has left many smaller employers in a precarious condition,” Nevin said. “At a time when business investment has been collapsing and trade uncertainty growing, these firms need government to lead by example and help ensure companies have the confidence they need to spend money that will ultimately create jobs and wealth.”

Delays

The programs affected govern tax reliefs to small and medium-sized companies, and one aimed at large companies, which some smaller companies also use, called the Research and Development Expenditure Credit, or RDEC. The latter has delays on claims stretching back to December, while there are also outstanding claims from April in the SME scheme, Baker said.

The tax authority, Her Majesty's Revenue and Customs, acknowledged there have been delays, noting that it “reviews tens of thousands of claims for R&D tax relief each year.”

“Claims for relief are carefully scrutinized irrespective of the size or structure of an applicant,” HMRC said in an email. “We are sorry that some businesses have not received payments as quickly as we would like and staff have been recruited to help with processing.”

Examples include one small company that's waiting on a claim split between the two R&D programs, according to Jumpstart Partnership Director Sandy Findlay. Under the SME plan, it's been awarded 45,000 pounds ($55,000) but the tax authority won't pay out until it's processed the RDEC portion of the claim, he said.

Another larger company, which typically gets a million pounds a year through the RDEC program, is having to investigate finance facilities after delays in processing this year's claim, Findlay said.

“This is the worst we've seen it,” Baker said. “We're experiencing companies that need that funding, and it's whether or not they can last until HMRC can process the funds for them.”

--With assistance from Jessica Shankleman.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Thomas Penny, Andrew Atkinson

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