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R&D

January 14, 2021 by Megan Joyce Leave a Comment

R&D tax credits can be a valuable support mechanism for many SME’s, providing financial support to companies who strive to achieve better ways of working through innovation and development. 

However, there are also other forms of financial relief provided by the Government, including many new initiatives in 2020 as a direct result of the Coronavirus pandemic.  

The UK Government has spent billions on relief helping businesses get through the pandemic by the means of grants and loans such as Coronavirus Business Interruption Loan Scheme (CBILS), Bounce Back Loans (BBLs) and Coronavirus Job Retention Scheme (CJRS). 

With many of the government relief options falling under either “State Aid” or “De Minimis Aid” status, the big question for many businesses claiming R&D tax credits is – Can I still claim R&D tax credits if I’ve received COVID-19 relief?  

The answer is complex and depends on a number of factors, so we’ve broken it down into some of the common areas of COVID relief.  

Coronavirus business Interruption Loan Scheme (CBILS) 

CBILS is a Government funding scheme set-up to help SME’s during COVID-19 to ensure that these businesses did not go into liquidation. CBILS falls under the category of State Aid.   

Usually where Notified State Aid has not been allocated to fund a particular project or expense, HMRC assume it was divided out to all areas of expenditure and projects equally.  This therefore makes the R&D projects ineligible for the SME R&D tax relief. As a result of this, HMRC have issued the following statement: 

“The Government has notified CBILS as a State aid under the European Commission’s new Temporary Framework for COVID-19. The measure is a fully notified aid, so the restriction on receipt of other State aid (s1138(1)(a) CTA 2009) potentially applies, if the CBILS relates specifically to the company’s R&D expenditure [on a project] rather than being intended more generally to support the company. This will depend on the facts.”

Taking this statement into account, it would appear that HMRC is taking the view that if a business has claimed CBILS for general business support, it should not necessarily mean the business is now ineligible to claim R&D relief under the SME scheme. However, 

if the CBILS application specifically relates to an R&D project or is used to fund an R&D project, it will disqualify the company from claiming R&D under the SME scheme. 

Bounce Back Loans (BBLs) 

Unlike CBILS, the Bounce Back Loans falls under De Minimis Aid. Awarding authorities should tell companies when they are receiving De Minimis Aid; the company in receipt of De Minimis Aid must keep records for 10 years, detailing the total amount of aid received and what they used the de minimis aid for.

A company cannot claim R&D under the SME scheme for costs within a project that are funded by De Minimis Aid. However, a company can claim SME relief or payable credit for costs within the project not funded by De Minimis Aid. 

It is also worth noting that even if you are not eligible to make an R&D claim under the SME scheme, you may still qualify to make a claim under the RDEC (large company) scheme. 

Coronavirus Job Retention Scheme (CJRS)

In short, if you furloughed employees and claimed the Coronavirus Job Retention Scheme, the main criteria for CJRS was that furloughed employees cannot carry out work on the company’s behalf during the furlough period. As a result, the employee costs for the furloughed period cannot be considered eligible, as they were not contributing to the R&D project. 

Summary

If you are a SME claiming R&D Tax Credits and have received government support, you are best discussing the potential implications on your R&D claim with an expert. 

If you would like further information on how CBILS and Bounce Back Loans could affect your R&D claim, then please contact us using our details below.

(E) enquiries@advaloremgroup.uk or (T) 01908 219100 (W) advaloremgroup.uk  

Filed Under: Blog, News & Insights, R&D Tagged With: Covid-19

April 9, 2019 by Tania Toriello Leave a Comment

R&D (Research & Development) is a tax relief scheme which was introduced by the Government in 2000 to help and reward innovative businesses thus allowing them to progress.

What is R&D?

R&D takes all allowable expenditure incurred during the R&D project and allows you to gross it up by 130% meaning you can effectively deduct 230% of relevant costs from your profits. This equates to more than double of the allowable expenditure incurred.

Qualifying expenditure includes raw materials, staff costs, subcontractor costs and apportionments of overheads that are relevant to the R&D project. Loss making companies also benefit as they can opt for a cash payment of 14.5% of the losses made which increased from 11% as of 1st April 2014.

The R&D claim is submitted with a written report outlining why the project(s) undertaken qualify for R&D and backing schedules with details of costs incurred.

How far back can you claim R&D tax relief?

You have two years from the end of your accounting period to submit an R&D tax credit claim for any qualifying expenditure that you’ve identified during that period. This is because R&D tax credits are a Corporation Tax relief and the deadline for amending your Corporation Tax return is typically 24 months after the end of your accounting period.

Who qualifies for R&D?

The main requirement for a successful R&D claim is that your company is undertaking work which seeks to achieve an advance in science or technology.

The activities that directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are also eligible for R&D relief.

The common misconception is that the R&D tax relief only applies to those companies working in a scientific sector. In actual fact any sector could qualify for R&D relief if they can prove the project lead to an improvement in that field.

Here are some examples:

  • Food & drink
  • Pharmaceuticals
  • Electronics and Electricals
  • Engineering
  • Foundries
  • Software & IT
  • Manufacturing
  • Chemicals & Glues
  • Waste Recycling Plants
  • Video Games Development

If you think your company could be eligible for R&D tax relief, there are a number of things that we can help you do in order to maximise your R&D claim.

These include:

  • Collecting information on what R&D projects you have done or will be doing so that we can advise whether you qualify for R&D relief.
  • Establish what costs were incurred during the R&D projects and ensure you have the evidence for these in the event that HMRC request further information.

If you would like to speak to us regarding R&D tax reliefs and whether you would be eligible, please contact us using the details below:

01908 219100

enquiries@advaloremgroup.uk

Filed Under: News & Insights, R&D, SME Business Tagged With: R&D

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