Top 5 Questions About The Effects Of The Coronavirus Pandemic On R&D Tax Credits

With the coronavirus-induced economic downturn already having a sharp impact, many businesses are looking for ways to smarten up their cash flow. Making a claim now for R&D Tax Credits could well yield a substantial monetary boost short-term which can seriously help to cushion to blow.

As the COVID-19 crisis was starting to bite back in March, Chancellor Rishi Sunak announced a series of emergency measures with more measures likely to be announced in the months to come.

In this article, we’ve put together the common questions that clients are most likely to ask us in regard to R&D Tax Credits during this challenging time. Of course, the subject of R&D Tax Credits is complex in itself which is why we recommend working with R&D tax specialists such as ourselves. We have many years’ experience dealing with R&D tax issues and can help you deliver a complete, accurate and efficient R&D tax claim

R&D Tax Credits in brief

R&D Tax Credits allow UK-based companies to receive financial assistance in funding technological or scientific research work. The benefit is administered either as a reduction in a company’s Corporation Tax liability, or as a lump sum for companies that have made a loss. In simple terms, they offer an essential cash injection for R&D activities already undertaken. By not making a claim, you could miss out on the chance to unlock hidden value in your business. Indeed, the R&D Tax Credits scheme is extremely generous, covering as much as 33 pence for £1 spent on R&D work.

The parameters of the scheme are incredibly broad in terms of projects and costs, and any UK company can apply. You can brush up on your R&D tax relief knowledge on our R&D Tax Credits page.

1. Is the Coronavirus Business Interruption Loan Scheme (CBILS) likely to affect SME R&D claims?

One of Riski Sunak’s key measures to help businesses is the Coronavirus Business Interruption Loan Scheme. Under the European Commission’s temporary new framework for COVID-19, the CBILS has been classed as a notified state aid. Due to this, companies who would usually have made R&D claims under the SME scheme may instead need to use the less generous Research and Development Expenditure Credit (normally reserved for larger companies).

As usual, the devil is in the detail. The decider will be whether the CBILS relates to the company’s R&D activities specifically, or whether it will be used to prop up the business more generally. If it’s the latter, R&D Tax Credits should still be available. However there will be emphasis on outlining exactly what the loan will be used for over the next 18 months. HMRC have made it clear they will monitor the situation closely and are welcoming feedback.

2. How long is HMRC taking to process R&D Tax Credit claims during the COVID-19 disruption?

Luckily HMRC are not reporting any significant delay to application processing times at the moment. Staff are currently able to work both at home and on-site, so it’s generally business as usual. Furthermore, they have indicated that they’re now prioritising SME Tax Credit claims so that smaller businesses can be helped quicker. The target of 28 days from submission is also currently still being met. This is worth pointing out to your clients to offer them some reassurance and to encourage them in getting their claims in as soon as possible.

More info can be found on our news page here: R&D Tax Credit Claim Processing Times - COVID-19 Update

3. Due to the pandemic I’m no longer a “going concern”. Can my business still benefit from R&D Tax Credits at this time?

The rules around “going concern” are based upon the most recent set of accounts that Companies House has received. As the majority of them will have been submitted before COVID-19 became an issue, R&D Tax Credits should still be claimable. However this is something HMRC are also revisiting as time goes on with a view to possibly making changes further down the line.

4. Is the Job Retention Scheme likely to affect my claim for R&D Tax Credits?

You may well find clients come to you regarding furloughed worker grants under the Coronavirus Job Retention Scheme, and whether this would compromise a claim for R&D Tax Credits.

HMRC has made it clear that Coronavirus Job Retention Scheme grants will not bar companies from receiving R&D Tax Credits, even though these grants are technically state aid. The reasoning is that the grants are for funding the business itself and keeping it afloat during the pandemic, not for funding R&D work specifically. We’re happy to discuss this with you in more details if required.

5. I currently owe tax to HMRC that isn’t related to R&D. Will they still collect this from my R&D tax relief in light of the current COVID-19 situation?

For companies claiming their R&D Tax Credits using RDEC, the current rules apply regardless of the pandemic. However, HMRC are still considering the options when it comes to claims made under the SME scheme. It is hoped that they might prioritise payment of R&D Tax Credits over the pursuance of other liabilities, but this remains to be seen. We can work with you on this as more information becomes available.

How Myriad Associates can help you help your clients at this challenging time

The priority for us at this time is to make sure all our clients receive the fastest, most efficient R&D tax relief service possible. We understand how concerned businesses are right now, and that's why at Myriad Associates it’s business as usual. All our colleagues are successfully set up remotely and we’re working flat out to meet the needs of our clients.

Again, we would strongly recommend that if you have an R&D tax claim to make that you get this submitted to HMRC as soon as possible.  Not only will this give your business a much needed cash injection, it will also mean that you’re at the front of the queue with HMRC.

Get in touch today via our contact page to start your R&D tax claim today