R&D Tax Relief Delays Leave SMEs Struggling to Plan
R&D Tax Relief Delays Leave SMEs Struggling to Plan
R&D tax relief is designed to help innovative businesses invest, recruit and grow. But for many small and medium-sized enterprises (SMEs), long waits and greater scrutiny are making that support difficult to rely on.
What the research found
Commissioned research surveyed 254 CFOs at R&D-active SMEs. Among businesses that had faced an HMRC enquiry since reforms began in 2023, 59% said they waited four to six months for a substantive update.
That uncertainty is affecting financial decisions. Nearly three-quarters of finance leaders (72%) said HMRC’s processing and payment times made the relief too unreliable to include in financial planning. Meanwhile, 70% said their business had received relief before HMRC later opened a compliance check seeking to reduce or recover part of it.
The impact on growth
For cash-conscious SMEs, delays can have real consequences. Respondents reported postponing projects, scaling back recruitment, taking out loans and leaving vacancies unfilled. Of those facing financial pressure, 29% relied on directors’ personal funds to bridge the gap.
Larger SMEs appeared particularly cautious: 45% of firms employing 250 to 499 people said they had chosen not to submit a claim following the reforms, compared with 23% across all respondents.
Why the system changed
The government introduced reforms to tackle fraud and error and ensure taxpayers’ money supports genuine innovation. HMRC says every claim is risk assessed, with additional checks used only where risks are identified.
It also says most claims are paid without further checks. In 2025–26, HMRC processed 89% of payable credit claims within 40 days, exceeding its published target of 85%.
What does this mean for SMEs?
Stronger compliance may be necessary, but businesses also need speed, consistency and clarity. R&D tax relief can only encourage investment if eligible companies feel confident, they can access it without prolonged uncertainty.
For SMEs considering a claim, careful record-keeping and specialist advice can help reduce risk. For policymakers, the challenge is to protect public funds while preserving a scheme that enables genuine innovation and growth.
Need help with an R&D tax relief claim?
Contact Kennedys Accounting for practical guidance on eligibility, preparing your claim and navigating HMRC enquiries. Email info@kennedysaccounting.uk or call 01233 539501.