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The government has put in place a number of well publicised COVID-19 related financial measures but what impact could these measures have on your R&D tax relief, patent box or video games tax relief claims?
Your business needs to make smart decisions
Coronavirus Business Interruption Loan Scheme (CBILS)/Bounce Back Loan
Will you be able to claim CBILS and the R&D Tax Credit?
CBILS (the Corona Business Interruption Loan Scheme) and BBLS (the Bounce Back Loan Scheme) are fully notified state aid so they can impact your ability to claim the SME R&D Tax Credit.
If you’re considering applying (or have already applied), then we’d encourage you to get in touch with us to discuss any potential impact.
Furloughing staff
This scheme is open to all UK employers for at least 3 months, starting from 1st March 2020. Businesses can put in claims for 80% of furloughed employees’ usual monthly wages, up to a maximum of £2,500 per month. Salaries can be supplemented up to the normal amount by the employer if desired.
What impact will this have on your R&D claim? Furloughed employees are not working and therefore it is not possible for them to be directly and actively engaged in R&D as is required by the R&D legislation.
Therefore, if you’ve furloughed members of your R&D team or others who are indirectly involved in R&D then your future R&D claim will be lower. But because this is a retrospective credit, you probably won’t feel the impact of this lower claim until next year when you make your R&D claim for 2020.
Future fund
These convertible loans are commercial. They are not State aid, they are not caught by s1138 CTA 2009 and they need not be considered when looking at the State aid cumulation rules.
Therefore there should be no impact to your tax credit claims.
Deferred tax liabilities or time to pay arrangements
Where Ministers have agreed that tax can be deferred for a specific regime to support businesses in the COVID-19 period, i.e. the ITSA payment on account and VAT quarterly payment deferrals, RDEC or payable tax credit will not be set against any of those amounts before therevise due date.
However
Where tax has been deferred as part of a Time to Pay (TTP) arrangement, HMRC will follow existing policy and set any R&D tax credit off against any TTP liability, not just the amount owing at the point in time the credit is paid. This would include informal deferrals offered in advance of TTP arrangements being put in place.
Also, for the RDEC scheme, any liabilities owed to HMRC will be set-off against the credit.
This is a complex area with many nuances. For further information then please get in touch.
If you have any questions about eligible costs please get in touch or to speak directly and confidentially to a consultant, call us.
Alexis is one of the founding Directors of MMP Tax.
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