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R&D TAX RELIEF AND COVID-19

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R&D tax reliefs are part of the government’s strategy to incentivise innovative companies but many are still missing out on the generous reliefs available.

For those companies making R&D claims, the cash flow benefits will be vital in these challenging times, however many will also have taken advantage of the government’s coronavirus support measures and need to be aware of the impact these may have on their R&D claims.

THE CORONAVIRUS (LARGE) BUSINESS INTERRUPTION LOAN SCHEME (CBILS), (CLBILS), AND BOUNCE BACK LAONS (BBL)

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%.

THE CORONAVIRUS JOB RETENTION SCHEME (CJRS) – Furlough

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.

DEFERRED TAX PAYMENTS

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.

Menzies make over 200 claims a year and save our clients over £10million per annum in tax but also offer wider advice around the innovation lifecycle of a businesses with broader commercial thinking.

If you are making R&D claims, have taken advantage of the government’s coronavirus support measures and want advice to ensure this does not unduly restrict your R&D claim repayments, contact Anthony Lalsing via his below profile.

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