A company in administration or liquidation is not a going concern, and almost everything else follows from that. Under the merged scheme the claim still works, up to a point: the credit is set against corporation tax and other sums owed to HMRC, but no cash is paid, and payment revives only if the company is a going concern again before its claim deadline passes. Under ERIS, the route for R&D-intensive loss-making SMEs, the claim cannot be made at all — and a claim already made is treated as never made if the company loses going concern status before the money arrives. What decides all of this is the date the claim goes in, not the date the spending happened.
What counts as a going concern here, and when is it tested?
Three conditions, applied to the company on the day the claim is made: its latest published accounts were prepared on a going concern basis; nothing in them indicates that basis was adopted only because of an entitlement or expected entitlement to R&D relief; and it is not in administration or liquidation, here or under a corresponding foreign procedure. The definition and its statutory home sit on who can claim R&D tax relief; what matters here is what the condition costs a company in trouble.
Two features do the damage. First, the accounts that count are the latest published when the claim is made, not those for the claim period. Publish a set prepared on a basis other than going concern and every claim made while those remain the latest published accounts is caught, including claims for earlier, healthier years. Publish a later set on a going concern basis and the bar lifts. Second, the condition is circular by design: if the accounts show the going concern basis was adopted only because of an expected R&D credit, the company loses the payment those accounts relied on. The statute says “only”, which matters — a note that rests on the R&D credit alongside other support is not automatically fatal. But the wording of that note is now a tax question, and it is usually written months before anyone thinks of it that way.
What happens to a merged-scheme claim if the company is not a going concern?
The claim itself stands. Once claimed, the credit runs through seven steps, and the first six work through it in a fixed order. It discharges corporation tax for the claim period. Two deductions then come out — notional tax, and any excess over the PAYE cap. What is left discharges corporation tax for any other accounting period, may be surrendered to a group company, and finally discharges any other sum the company owes HMRC, VAT, PAYE and contract settlements among them. Only step seven, the cash payment, depends on going concern status.
So a company that is not a going concern still gets the value of the credit against what it owes. What it does not get is money. For a business heading into a formal process with corporation tax, VAT and PAYE arrears, the merged scheme claim shrinks the debt rather than producing a receipt. How that interacts with set-off once an insolvency procedure has begun is a matter of insolvency law, and one for the office-holder.
The payment is reinstated if the company becomes a going concern again on or before the last day it could amend the claim — the ordinary R&D claim window described on backdated claims, not a separate insolvency timetable. A rescue that completes inside the window releases the cash; one that completes after it does not.
Why is ERIS harsher than the merged scheme?
Because ERIS blocks the claim rather than the payment. A company that is not a going concern may not claim the additional deduction, may not make the pre-trading election, and may not claim the payable tax credit. If it makes a valid tax credit claim and then ceases to be a going concern before payment, the claim is treated as never having been made — although any amount already paid or applied before the change stands.
For a pre-revenue company this closes the only door there is. A company that has not started trading cannot use the merged scheme, which requires a trade; its single route is the ERIS pre-trading election. Lose going concern status and there is no R&D relief for the year at all. Whether it meets the 30% intensity condition stops mattering.
Can HMRC keep the credit against other debts?
Yes, by two routes. The steps above are the first: the credit clears what the company owes HMRC before any cash is paid.
The second route catches companies that are still going concerns. HMRC does not have to pay the credit while the company’s return for the period is under enquiry, though an officer may pay a provisional amount. Nor does it have to pay while the company has outstanding PAYE or NIC liabilities for that accounting period. A business in difficulty is very often behind on PAYE, so this is the rule that catches distressed claimants who have done everything else right. Clearing the payroll arrears before HMRC comes to pay is usually the cheaper sequence.
What can an administrator or liquidator claim for a period before appointment?
Once a liquidator or administrator is appointed, that person becomes the proper officer of the company for tax purposes, and returns and claims for periods before the appointment fall to them. The two roles differ. In a liquidation the liquidator is the only person through whom the company can act at all; an administrator is the proper officer, but others with authority to act for the company are not shut out.
What can be claimed follows the same test, applied at the date of the claim — by which time the company is not a going concern. A merged-scheme claim for a pre-appointment period can still be made, and a valid claim discharges liabilities through the first six steps, but nothing is paid at step seven. An ERIS claim cannot be made at all.
Beyond that, neither the legislation nor HMRC’s manual addresses office-holders separately. One point needs care. HMRC’s guidance on the pre-April-2024 RDEC scheme contradicts itself: the same page says both that a company in administration or liquidation cannot make a claim to relief, and that the RDEC going concern rule applied only to the step seven payment. For current-scheme periods the statute is clear. For older periods still inside the amendment window, expect to have to argue the point.
Filing mechanics need settling early too. Once a formal insolvency process is running — a winding-up order, administration, administrative receivership, a creditors’ voluntary liquidation or a CVA — the company is exempt from mandatory online filing, and HMRC will accept paper or informal returns from the office-holder for any period, including pre-appointment ones. A company merely in difficulty gets no such relaxation, and neither does a solvent members’ voluntary liquidation.
The R&D rules are not relaxed to match: the claim must be quantified in the return, the additional information form must reach HMRC no later than the claim, and claim notification, where it was required, had its own deadline long before any appointment. HMRC’s R&D guidance also says returns carrying R&D claims go through the Corporation Tax online service, and nothing published says whether a paper return can carry one. Settle that with HMRC rather than assuming it.
Can an R&D credit be assigned to a lender?
No. The right to be paid an R&D expenditure credit or an R&D tax credit may not be assigned, and a purported assignment, or an agreement to assign one, is void. The ban applies to assignments made on or after 22 November 2023, with a carve-out for assignments and agreements made before that date, and for later assignments carrying out such an agreement.
Nomination is restricted separately. For claims made on or after 1 April 2024 HMRC will generally pay only the claimant company. The exceptions are narrow: a connected nominee, or exceptional circumstances making payment to the company impracticable or inconvenient.
For a lender this changes the shape of the asset. A funding structure that works by taking an assignment of the credit, or an agreement to assign one, is void as to that assignment. Payment will not usually reach a third-party funder either, because neither nomination exception is built for one: a funder at arm’s length is not a connected party, and HMRC does not generally treat an ordinary commercial agreement with a nominee as an exceptional circumstance. Whether some other form of security reaches the credit is a question for the lender’s solicitors rather than a tax question. Arrangements written before these rules took effect are worth reading again against them.
Does moving the trade to another group company break the condition?
There is a carve-out, and it is narrow. Move the trade and the R&D to another company in the same group, and the accounts for the period in which the move happened can still be treated as going concern accounts — but only if the transfer is the sole reason they were not prepared on that basis.
Every part of that has to hold. The trade and the R&D must both move, the transferee must be in the same group, and only the accounts for the period in which the transfer happened are protected. HMRC’s examples on that last point sit twelve days apart: a company with a 31 December year end that transfers on 24 December is covered for that year; the same transfer on 5 January is not. A reorganisation that slips past a year end can cost a claim.
Who the transferee is matters as much as when. A sale outside the group is not covered. Neither, on the face of it, is the common pre-pack, where the trade goes to a company the transferor is not in a group with at the moment of transfer — and HMRC’s guidance does not say where the group boundary sits for this purpose. Where a transfer is in prospect and an R&D claim depends on it, settle the point before the accounts are signed.
What order should a company in trouble do things in?
- Settle the going concern position first. It decides whether the claim produces cash, a reduction in HMRC debt, or nothing — and it is tested at the date of claim, so file a ready claim before any step that changes the company’s status.
- Read the draft accounts as a tax document. The going concern note and the basis of preparation are conditions of payment now, not just disclosure.
- Treat the credit as cash only when it lands. A claim is not a receivable a board can spend, and payment timing is outside the company’s control — more so if the return is enquired into.
- Check the procedural gates early. Notification and the additional information form can permanently close a claim that would otherwise succeed.
Talk it through with a chartered adviser
Distress shortens the time available and raises the cost of getting the order wrong, so the R&D position is worth settling before a formal step. LimestoneGrey is a firm of Chartered Tax Advisers and Chartered Accountants, regulated by ICAEW, specialising in R&D tax relief. Every claim is signed off by a chartered adviser, and enquiry support is included as standard.
If your company, or a company you are advising, is facing this decision, get in touch.
Sources
- Section 1112F, Corporation Tax Act 2009 — no amount payable at step 7 where a merged-scheme claim is made while the company is not a going concern; reinstatement if it becomes one by the claim amendment deadline; the bar on ERIS claims and the pre-trading election; and the rule treating a tax credit claim as never made, except so far as an amount was already paid or applied.
- Section 1112G, Corporation Tax Act 2009 — the meaning of going concern, the administration and liquidation rule including corresponding foreign procedures, and the intra-group transfer of trade exception.
- CIRD191000: going concern — HMRC’s statement of the condition under both current schemes, and the two worked examples showing that the transfer must fall inside the period covered by the accounts.
- Section 1042I, Corporation Tax Act 2009 — the seven steps, including discharge of corporation tax for the period and for any other period, group surrender, and the application of the balance against any other sum owed to HMRC, with only step 7 subject to sections 1112F and 1112H.
- CIRD112100: new RDEC payment steps — HMRC’s walk-through of the same steps, confirming that step 6 covers VAT, PAYE and contract settlements.
- Section 1112H, Corporation Tax Act 2009 — HMRC need not pay while the return is under enquiry, with discretion to pay provisionally, and need not pay where PAYE or NIC liabilities for the period are outstanding.
- Section 1142C, Corporation Tax Act 2009 — the right to be paid an R&D expenditure credit or R&D tax credit may not be assigned, and a purported assignment or agreement to assign is void.
- Finance Act 2024, Schedule 1, Part 3 — the assignment ban does not apply to an assignment made before 22 November 2023, an agreement made before that date, or an assignment made afterwards to carry out such an agreement; the nomination restriction applies to claims made on or after 1 April 2024.
- Section 1142D, Corporation Tax Act 2009 — payment only to the claimant company, subject to the connected-party and exceptional-circumstances exceptions.
- CIRD81805: nominations and assignments — HMRC’s operational guidance on both restrictions, including what it does where a void assignment has been notified.
- Section 108, Taxes Management Act 1970 — where a liquidator or administrator has been appointed, that person is the proper officer of the company; and where a liquidator has been appointed, no other person with authority may act for the company.
- COM130050: online filing and the end of a company’s life — the liquidator as the only person through whom a company in liquidation can act, and the exemption from mandatory online filing where a winding-up order, administration, administrative receivership, creditors’ voluntary liquidation or CVA is in effect, for any period including periods before the appointment; the exemption does not extend to a solvent members’ voluntary liquidation.
- CIRD181000: reformed reliefs claims process — claims must be quantified in the return, and returns and amendments containing R&D claims are to be made through the Corporation Tax online service.
- Paragraph 83EA, Schedule 18, Finance Act 1998 — a claim is invalid unless the additional information has been provided no later than the date the claim is made or amended.
- CIRD81130: company a going concern — the pre-April-2024 position, where the same page states both that a company in administration or liquidation cannot make a claim to relief and that the RDEC going concern rules apply only to payments at step 7. CIRD89820: RDEC payment restrictions repeats the first of those on a page otherwise dealing with the payable credit.