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Will government Covid-19 Support Affect Your R&D Tax Credit Claim?

The government has provided a plethora of support measures for companies affected by Covid-19 including Coronavirus Job Retention Scheme (CJRS), Coronavirus Business Interruption Loan Scheme (CBILS), Job Support Scheme (JSS) and Bounce Back Loans (BBLs).

The rules regarding the receipt of these government support measures and R&D tax credit claims can be quite complex. Here is a brief summary of how government support might affect your R&D tax credit claims.

Coronavirus Job Retention Scheme (CJRS)

Furloughed employees must have ceased all work during CJRS claim periods so HMRC will consider that those employees cannot be regarded as being directly or actively engaged in relevant R&D during those times.

Any support received does not affect an R&D claim that otherwise could be made – the CJRS funding received is in respect of employees who could not work on an R&D project and therefore should not affect any R&D project and costs that were ongoing at the time.

Where employees were furloughed and where no CJRS payments were received, HMRC will consider that those employees cannot be regarded as being directly or actively engaged in relevant R&D, and again there is no effect on a R&D tax credit claim that can otherwise be made.

Coronavirus Business Interruption Loan scheme (CBILS)

The scheme offers loans to SMEs whereby the government pays the first 12-months of interest payments and any lender-levied fees.

The CBILS is classified as notified state aid. If you have a CBIL and the money is spent in an area of business that is not related to your R&D claim, then your R&D projects will not be affected by this loan.

However, if you use money obtained through a CBIL to fund your R&D projects, then the projects funded by the CBILS will not qualify under the SME scheme but could claimed under the RDEC scheme.

This can be a complicated area and you should seek professional advice if you are unsure.

Bounce Back Loans (BBLS)

The BBLS opened on the 4th of May 2020 to provide SME businesses guaranteed access to loans of up to £50,000, guaranteed by the government.

This is also classed as fully notified state aid although the BBLS may come under the de minimis exemption. Theoretically, this means that those businesses taking advantage of this support could see an effect on any subsequent claims for R&D Tax credits. However, as the support is designed to offer general financial support to businesses, and not specifically to fund an R&D project, R&D claims should actually not be impacted although this is not always clear cut.

Get in touch

The rules regarding the receipt of government support measures and R&D tax credits can be quite complex. If your company has benefitted from any type of government funding during the Covid-19 outbreak, and you need advice about how this could affect R&D tax credit claims, get in touch.

Disclaimer

The information was correct at time of publishing but may now be out of date.

Tax
Posted by Cowgills
19th April, 2021
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