RDTI in-year payments

Rules of the former in-year payments scheme

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  What are RDTI in-year payments?

  RDTI in-year payments offer you the option of an interest-free government loan that can provide regular cash payments towards your R&D costs, starting in the same year as you conduct your R&D.

  This will enable you to get support closer to when R&D costs are incurred, rather than waiting for your RDTI tax credit to be issued (which can only happen after you’ve submitted your income tax return, and your RDTI Supplementary Return has been finalised by Inland Revenue).

  You can request up to 80% of the value of your expected tax credit for a particular income year.

  Generally, the loan won’t need to be repaid until after your RDTI Supplementary Return has been finalised.

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  Who’s most likely to benefit from RDTI in-year payments?

  Any business that has applied for the RDTI can apply for RDTI in-year payments. However, they are mainly designed for businesses that have no - or only partial - access to the other method of ‘in-year’ support offered by the RDTI.

  If you’re a profitable business, you already have the option of using up to 100% of your anticipated RDTI tax credit for a given income year, to offset your provisional tax payments for that year.

  This option isn’t available, or can’t be fully utilised, by the following businesses, who will benefit the most from RDTI in-year payments:

  • businesses with no provisional tax to pay, such as start-ups and those operating at a loss
  • profitable businesses whose RDTI tax credit exceeds any provisional tax due

  Who administers RDTI in-year payments?

  TMNZ has been engaged to manage and administer RDTI in-year payment loans on behalf of the Government.

  TMNZ are the originators of tax pooling in New Zealand.

  Are there any criteria I need to meet before I can receive RDTI in-year payments?

  You can take advantage of RDTI in-year payments if you meet the following criteria:

  • • your business is a going concern
    • you are performing R&D activities that have been approved as eligible for the RDTI
    • you pass Anti-Money Laundering (AML) and Due Diligence (DD) checks that will be carried out after you apply for RDTI in-year payments
    • you give your consent for TMNZ to:
      • access specific information in your IR RDTI account that's needed to process your loan application and payments, e.g. R&D activity and expenditure details, and
      • receive notification that your RDTI Supplementary Return has been processed, in order to arrange for the repayment of your loan.

  Please note that:

  • • before you can apply for RDTI in-year payments, you must first apply for the RDTI, by submitting either a General Approval application or Criteria and Methodologies application
    • before you can request any payment:
      • you must first apply for RDTI in-year payments and pass the AML checks, and
      • your RDTI application must be approved
    • all loans and payment requests must be approved by MBIE
    • information provided in your loan application and payment requests are subject to audit by MBIE, if required
    • if you have a previous RDTI in-year payments loan that remains unpaid after the due date, you are not eligible to receive another loan.

  Is it be possible to have more than one loan active at the same time?

  You could potentially have more than one active loan, if you take out a loan for a new income year and you still have a loan from a previous income year that has not yet matured.

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  How do RDTI in-year payments work?

  RDTI in-year payments offer you a loan to help support your R&D expenditure for a given income year.

  If you have more than one General Approval application, you can include expenditure associated with each application on the same loan.

  It will only be necessary to apply for the loan once per income year, but you will be able to request payments at up to 3 regular intervals.

  Each payment will be based on actual, eligible R&D expenditure prior to the payment date.

  The loan will generally become due for repayment after your RDTI Supplementary Return has been finalised by Inland Revenue, although a different repayment date may apply in some circumstances (see "When will I have to repay my loan?" below for more details).

  No interest will be charged on your loan if it’s repaid on time.

  Examples of loan payment calculations

  Example 1:  payment calculation with no provisional tax to offset

  In this example, a business:

  • • requests a payment based on prior, eligible expenditure of  $300,000, and
    • advises that it does not intend to offset any amount against provisional tax.

  Actual eligible R&D expenditure: $300,000

  RDTI tax credit @ 15%: $45,000

  Less amount offset against provisional tax: $0

  RDTI tax credit eligible for RDTI in-year payments: $45,000

  Loan payment @ 80%: $36,000

   

  Example 2:  payment calculation with provisional tax to offset

  In this example, a business:

  • • requests a payment based on prior, eligible expenditure of  $300,000, and
    • advises that it intends to offset $25,000 of its anticipated RDTI tax credit against provisional tax due during the period covered by the payment.

  Actual eligible R&D expenditure: $300,000

  RDTI tax credit @ 15%: $45,000

  Less amount offset against provisional tax: $25,000

  RDTI tax credit eligible for RDTI in-year payments: $20,000

  Loan payment @ 80%: $16,000

   

  Benefit of using the anticipated RDTI tax credit to offset provisional tax
  Note that in example 2, the total benefit to the business is $41,000 (made up of the provisional tax offset of $25,000, plus the RDTI in-year payment of $16,000).

  This compares to a total benefit to the business of $36,000 in example 1.

  The difference reflects the benefit, if possible, of using the anticipated RDTI tax credit to offset provisional tax, given 100% of the credit can be offset this way, versus accessing 80% of the anticipated credit via RDTI in-year payments alone.

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  How much can I get?

  You can get up to 80% of the RDTI tax credit receivable on actual, eligible R&D expenditure per income year, after any amount you wish to offset against provisional tax has first been deducted.

  We’ve provided some examples of loan payment calculations below.

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  What are the payment dates?

  Please remember that your General Approval or CAM application has to be fully approved in order for a payment request to be made.

  What happens if I miss a particular payment?

  If you miss a particular payment date/s, you can include expenditure prior to that date in a subsequent payment request for the same income year.

  It is not possible, however, to carry forward expenditure from a previous income year to a subsequent income year.

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  How do I apply for RDTI in-year payments?

  RDTI in-year payments are managed and administered by TMNZ.

  What's involved in applying?

  Applying for RDTI in-year payments requires you to:

  • Register - this enables you to create an RDTI in-year payments account for your business and advise which users you want to access the account and act on your behalf. Once you’ve set up an account you can apply for RDTI in-year payments.
  • Apply - this step is to:
    • check that you have applied for the RDTI
    • identify your potential loan amount, based on estimated expenditure on your RDTI application
    • identify your NZBN number and other information to enable Anti Money Laundering (AML) and Due Diligence (DD) checks to be carried out
    • obtain your authority for TMNZ to access your IR RDTI account (to check R&D activities and expenditure details) and be notified once your RDTI Supplementary Return has been processed (to activate your loan repayment).

  As soon as you’ve applied for RDTI in-year payments and passed AML checks, you can request a payment.

  Remember:

  • • before you can apply for RDTI in-year payments, you first need to apply for the RDTI, by submitting either a General Approval application or Criteria and Methodologies application
    • if you have a previous RDTI in-year payments loan that remains unpaid after the due date, you are not eligible to receive another loan.

  What's the deadline be to apply for RDTI in-year payments?

  To request a payment on a particular date, you will need to apply for RDTI in-year payments and submit a payment request ahead of that date.

  The dates for all deadlines will be announced in the future.

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  How do I request a payment?

  To request a payment, you need to submit a payment request ahead of the actual payment date. 

  What details are required on the payment request?

  When requesting a payment, you will be asked to:

  • • record all eligible expenditure you wish to have taken into account
    • advise the amount of any provisional tax you intend to offset 
    • provide a declaration from a signatory of your business (such as a Director or the Chief Financial Officer) to attest that the request is a true and correct record of expenditure, and your business remains a going concern.

  Will I have to record all eligible expenditure on a payment request?

  It will be up to you how much of your total eligible expenditure you record on a payment request.

  We appreciate that:

  • • many businesses will want to access the maximum loan amount available to them
    • some businesses may wish to keep their loan within a certain limit, to manage their loan exposure and ability to repay the loan
    • some businesses may wish to restrict their loan to easily identifiable costs, such as people costs, and leave allocated costs (such as depreciation on shared assets) solely for their RDTI Supplementary Return.

  What happens if my expenditure exceeds the estimate recorded on my RDTI application?

  If there’s a significant difference between the estimated expenditure on your RDTI application and the actual expenditure you enter when requesting a loan payment, you may be asked to:

  • • provide evidence that supports the increased spending, and
    • seek an alteration to your RDTI application.

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  When do I have to repay my loan?

  Your RDTI in-year payments loan will be due for repayment on whichever date below applies to you:

  If you have filed your RDTI Supplementary Return by the due date
  Your loan will be due on the earliest of the following dates:

  • one month after Inland Revenue has approved or declined your RDTI Supplementary Return, or
  • six months after the due date of your RDTI Supplementary Return.

  If you have not filed your RDTI Supplementary Return by the due date
  Your loan will be due one month after the due date of your RDTI Supplementary Return.

  What will happen if my loan isn't repaid by the due date?

  If your loan isn’t repaid by the due date:

  • interest will be charged on the loan from one month after the due date - this will reflect Inland Revenue’s “Use of Money” interest rate applicable at the time.

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  Working out what you can afford to repay

  If you intend to apply for RDTI in-year payments, we recommend that you carefully consider:

  • how you might receive your RDTI tax credit, i.e. as a cash refund and/or a tax credit, and
  • how this could affect your ability to repay your loan.

  This is because regardless of how you receive your RDTI tax credit, your RDTI in-year payments loan will become due for repayment on the applicable due date.

  What you may wish to consider before taking out a loan

  Any RDTI tax credit that can’t be offset by tax due can be refunded in cash, up to a cap equal to the amount of labour-related taxes you pay, including:

  • PAYE
  • fringe benefit tax (FBT)
  • employee superannuation contribution taxes (ESCT).

  Any remaining tax credit will be carried forward to a future income year.

  If you are relying on a cash refund to repay an RDTI in-year payments loan, we suggest you calculate what your anticipated refund might be in advance. This may help you determine what is an affordable amount for you to borrow.

  Remember, it will be your responsibility to ensure you are in a position to repay the loan.

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  It's important to file your RDTI Supplementary Return on time

  If you take out an RDTI in-year payments loan, it's important to file your RDTI Supplementary Return on time.

  This is because no RDTI tax credit can be issued if you miss the RDTI Supplementary Return deadline.

  RDTI Supplementary Returns are due within 30 days after the due date of your income tax return.

  Filing your RDTI Supplementary Return on time will help avoid you being in a position where you have an RDTI in-year payments loan, but potentially no RDTI tax credit to offset the loan.