We sat down with Paul Rosser, R&D software consultant and Partner at RCK Partners, to discuss the government's announcement that R&D tax credits will be excluded from Quarterly Instalment Payment (QIP) calculations from April 2027. With over two decades of experience in R&D tax relief, Paul shares his insights into what this change means for companies claiming and why it represents a positive step for business cash flow.
As per an announcement last week, from April 2027, companies claiming:
will no longer need to include these credits when determining whether they fall within the Quarterly Instalment Payment (QIP) regime.
The Quarterly Instalment Payment regime is the set of rules which requires larger companies to pay corporation tax in instalments during the accounting period, rather than paying the whole amount nine months and one day after the period has ended.
In broad terms, it is a cash-flow acceleration measure: HMRC receives tax earlier from companies with higher profits, while companies have to estimate their current-year corporation tax liability before the final figures are calculated.
For QIP purposes, a company’s classification is outlined below:
‘Large’ companies:
'Very large’ companies:
At present, when claiming R&D tax relief using the old RDEC, or new merged R&D schemes an “above the line” R&D tax credit is generated which adds to the companies augmented profits and taxable income. In some cases, this can push companies over QIP threshold.
For smaller companies requiring earlier corporation tax payment can create additional cashflow pressure, so this new announcement is very much welcomed. Especially as since its introduction in 2024, the majority of companies have had to claim R&D tax relief using the new merged scheme and this update removes a major unintended consequence of claiming R&D tax relief.
The April 2027 QIP reform ensures that R&D tax credits do not inadvertently penalise companies through earlier tax payments by pushing their taxable profits over the QIP threshold.
For CFOs, this is a positive cash flow development, reducing the risk of claiming R&D tax credits, accelerating the businesses tax liabilities.
Written by Paul Rosser
Find out who can claim capital allowances in the UK, and which assets and property types qualify.
A step-by-step guide to making a capital allowance claim in the UK.
A Times-featured study, commissioned by RCK Partners and conducted by Censuswide, suggests that recent reforms to the UK's R&D tax relief scheme may have gone too far. The research found that measures introduced by HMRC to tackle abuse of the scheme are having unintended consequences for genuine innovators, with many businesses reporting that they have cancelled research initiatives, paused investment plans and reduced skilled headcount as a result of increased uncertainty surrounding the regime.
.jpg)
%20(4).png)
