R&D TAX RELIEF AND COVID-19

CBILS, CLBILS, and BBL have been an invaluable source of income in sustaining many businesses at this difficult time, however HMRC have confirmed the above schemes are all notified state aid. A company cannot claim under the SME R&D scheme for a project if they have received another notified state aid, as the rules do not allow a company to receive two state aids for the same project. If a company receives one of the above and uses this to fund an R&D project they will be unable to make a claim for the same expenditure under the SME R&D scheme. Although potentially still able to claim under the large (RDEC) scheme for expenditure this could mean a reduction in the R&D tax credit of as much as 23%.

CJRS has been utilised by many companies to assist with retaining staff and ultimately staying in business.  The furlough scheme has offered much needed respite for companies, and while the costs will still likely appear in the payroll and accounts, these are ultimately met by the government. Whilst on furlough, staff will have been unable to carry out R&D and companies need to factor this into future cash flow forecasts as R&D claims will invariably be lower. As the furlough scheme comes to a close it will also be important for companies to consider the R&D tax reliefs as part of the cost vs benefit assessment when considering redundancies.

The government have confirmed that where tax has been deferred (for example VAT) as part of the government’s coronavirus support measures, R&D repayments will not be offset against these deferred liabilities. It is important to note this only applies in specific cases and not for example Time to Pay (TTP) arrangements.