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Covid-19

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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  

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Following the recent address from the Prime Minister we wanted to take the time to provide some further information regarding the newly announced support measures as a result of the new lockdown. We also wanted to highlight and provide a summary of some of the reliefs still in place from previous Government announcements, so you have an overview of the support available. 

New COVID-19 Support

Today (Tuesday 5th) the Chancellor announced £4.6 billion available for grants to help businesses in the retail, hospitality and leisure sectors, by way of a one-off grant worth up to £9,000 per property to help businesses through to Springtime. 

A further £594 million has been made available to support other impacted businesses via a discretionary fund. 

This support is in addition to the £1.1 billion further discretionary grant funding for Local Authorities, Local Restriction Support Grants worth up to £3,000 a month and the extension of furlough scheme until end of April 2021. 

The Government has also provided 100% business rate relief for retail, hospitality and leisure businesses, as well as extending the 100% government backed loans until the end of March 2021. 

The one-off top-ups will be granted to closed businesses as follows:

  • £4,000 for businesses with a rateable value of £15,000 or under
  • £6,000 for businesses with a rateable value between £15,000 and £51,000
  • £9,000 for businesses with a rateable value of over £51,000

Coronavirus Job Retention Scheme (CJRS)

If you’ve had to ask your employees to stop working or work less because of coronavirus (put them on ‘furlough’) you can get support to pay their wages for the hours they do not work.

The government will pay 80% of employees’ usual wages for hours they do not work, up to a maximum of £2,500 per month.

The scheme is open until 30 April 2021.

You must submit your claim by:

  • 14 January 2021, for eligible employees on furlough in December 2020
  • 15 February 2021, for eligible employees on furlough in January 2021
  • 15 March 2021, for eligible employees on furlough in February 2021
  • 14 April 2021, for eligible employees on furlough in March 2021
  • 14 May 2021, for eligible employees on furlough in April 2021

Check if you can claim your employees’ wages through the CJRS here

VAT deferral payments

If you deferred VAT between 20 March and 30 June 2020 and still have payments to make, you can:

  • pay the deferred VAT in full on or before 31 March 2021
  • opt in to the VAT deferral new payment scheme when it launches in 2021
  • contact HMRC if you need more help to pay

The online opt in process to the new payment scheme will be available in early 2021, but is not yet open. You must opt in to this scheme yourself, unfortunately agents cannot do this for you.

Instead of paying the full amount by the end of March 2021 the new payment scheme enables you to make up to 11 smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022. 

The scheme will allow you to:

  • Pay your deferred VAT in instalments without adding interest
  • Select the number of instalments from 2 to 11 equal monthly payments

To use this scheme you must:

  • Still have deferred VAT to pay
  • Be up to date with your VAT returns
  • Opt in before the end of March 2021
  • Pay the first instalment before the end of March 2021
  • Be able to pay the deferred VAT by Direct Debit

If you opt in to the scheme, you can still have a time to pay arrangement for other HMRC debts and outstanding tax.

For further information click here

Coronavirus Business Interruption Loan Scheme (CBILS)

The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to smaller businesses (SMEs) across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.

CBILS has been significantly expanded along with changes to the scheme’s features and eligibility criteria. The changes mean even more smaller businesses across the UK impacted by the coronavirus crisis can access the funding they need.

Importantly, access to the scheme has been opened up to those smaller businesses that would have previously met the requirements for a commercial facility but would not have been eligible for CBILS. This significantly increases the number of businesses eligible for the scheme.

Please note that as of 17 December, the Government has announced that the Coronavirus Business Interruption Loan Scheme (CBILS) will be extended until 31 March 2021.

To give you some breathing space, there are no repayments for the first 12 months. The Government will pay the interest during that time and the upfront fee, helping to reduce the overall cost. If you want to settle the loan early, there’s also no fees for full early repayment.

Am I eligible for a CBILS loan?

To be eligible to apply for a CBILS loan you need to meet the following criteria:

  • UK-based business that’s been adversely affected by coronavirus
  • Turnover of over £200,000
  • Minimum 2 years of trading history
  • Over 50% of turnover from trading activity (e.g. not from investments)
  • Loan is for business purposes
  • Loan is primarily for trading in the UK

When taking out a CBILS loan, the business is liable for the full loan amount. If the business is unable to repay, the scheme provides a partial guarantee to the lender, not to the business. A personal guarantee is required for CBILS loans of over £250,000.

For more information about CBILS or for assistance with your application, please contact our Specialist Services Manager – Andrew Chubb | andrewc@advaloremgroup.uk | 07702 458122

Find out what support is available to you 

If you are unsure what support is available to you, please follow the link below and answer the questions. 

Find out what support is available for your business here

If you have any questions at all about what support is available, please do not hesitate to contact us using our details below: 

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

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Bounce Back Loans and Coronavirus Business Interruption Loan Scheme 

Bounce Back Loans

The scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000. The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.

The scheme has been extended and is now open to applications until 31 January 2021.

Click here for more details on Coronavirus Bounce Back Loans

Coronavirus Business Interruption Loan Scheme 

The scheme helps small and medium-sized businesses to access loans and other kinds of finance up to £5 million. The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months.

The scheme has been extended and is open until 31 January 2021.

Click here for more details on the Coronavirus Business Interruption Loan Scheme

If you have any questions on the above then please contact us on the details below

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

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CJRS Update

This week, the UK Government announced the extension of the furlough scheme until the end of March 2021. 

The Government will cover 80% of hours not worked up to a maximum of £2,500 per person per month. 

  • Any grants paid must be passed on to the relevant employee in full.
  • The previous flexibility to allow employees back part-time will continue until December.
  • Employers will only be requested to cover National Insurance and pension costs and wages for time worked. Importantly, they will NOT be required to contribute to hours not worked but they are free to make top-up payment.

Which employers/employees can claim or be eligible for this extended support?

  • All employers with a UK bank account and a UK PAYE scheme can make a claim.
  • There is no requirement that employers or employees have made previous claims for CJRS support.
  • Employees must be on the employer’s payroll before midnight 30 October 2020.

SEISS Update

This week the UK Government also announced an extension and increase of the Self Employed Income Support Scheme to cover November, December 2020 and January 2021. On November 2nd 2020 Chancellor Rishi Sunak announced that the 3rd stage of the SEISS would be available earlier than initially expected and will now be available from the 30th November 2020. 

The grant will be offered to those who are self-employed and will provide up to 80% of average monthly trading profits to help support those who are unable to work due to COVID-19. The increase means that £4.5bn worth of support grants will be paid out to the self-employed between December 2020 and January 2021.

The SEISS grants are calculated over three months, with the initial uplift for November up to 80%, along with 40% of trading profits for December and January. This increases the total level of the third grant to 55% of trading profits with the maximum grant available increasing to £5,160.

Am I eligible for the grant?

  • To be eligible for the 3rd SEISS grant you have to have been previously eligible for the 1st and 2ndgrants, although you do not have to have claimed.
  • Individuals must declare that they intend to continue to trade and are either:
  • Actively trading but are impacted by reduced demand due to coronavirus.
  • Are currently trading but are temporarily unable to do so due to coronavirus.

There is due to be a 4th claim available to cover February, March and April 2021, however no details have been disclosed on this yet.

If you have any questions on the above then please contact us on the details below

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

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The Job Support Scheme is designed to protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce. The company will continue to pay its employee for time worked, but the burden of hours not worked will be split between the employer and the Government (through wage support) and the employee (through a wage reduction), and the employee will keep their job. 

The Government will pay a third of the hours not worked up to a cap, with the employer also contributing a third. This will ensure employees earn a minimum of 77% of their normal wages, where the Government contribution has not been capped. 

Employers using the Job Support Scheme will also be able to claim the Job Retention Bonus if they meet the eligibility criteria. 

The idea is that employers will pay their staff for the number of hours worked in their business as usual. However, for the hours you are contracted to work, but you do not work, the Government and your employer will split the pay. The Government will pay 1/3 of the hours not worked (capped at £697.92 a month) and your employer will pay the rest up to 80%. This means employees will earn 80% pay of the hours they do not work. 

In summary you will take 100% of your wage for actual hours worked in the business and 80% of your wage for the hours you are contracted to work, but you did not work in the business, due to unforeseen circumstances with COVID-19. 

Eligibility

Employers– All employers with a UK bank account and UK PAYE schemes can claim the grant. Large businesses will need a financial assessment test as this scheme will only be provided to those who are experiencing a low turnover due to Covid-19 impact. 

Employees– Employees must be on an employer’s PAYE payroll on or before 23rd September 2020. Submission notifying payment of an employee to HMRC must have been made on or before 23rd September 2020. This means submitting Real Time Information (RTI).

For the first three months of the scheme employees will be required to work at least 33% of their usual hours. After those three months, The government will consider whether to increase this minimum hour threshold. 

How to claim

The Job Support Scheme will be active from the 1st November 2020 and run until the end of April 2021. Employers will be able to make a claim through the Gov.uk website from the 1st December 2020. Payment after a successful claim will made on a monthly basis. The claim can only be submitted in any given pay period, after payment to the employee has been made and that payment has been reported to HMRC via a Real Time Information return (RTI).

Fraudulent Claims

HMRC intend to publish the names of employers who have used the scheme. The public can report fraud to HMRC if they have evidence to suggest an employer is abusing the scheme.

Employees will be able to check if their employer has made a claim relating to them via their Personal Tax Account (sign up on GOV.UK). 

  • HMRC will check claims and retain any claims found to be fraudulent or showing incorrect information. A full claim must be made by the employer and agreed with their staff. Employees must be notified in writing of any changes made to their contract.

Example given by the Government 

  • Beth normally works 5 days a week and earns £350 a week. Her company is suffering reduced sales due to coronavirus. Rather than making Beth redundant, the company puts Beth on the Job Support Scheme, working 2 days a week (40% of her usual hours). 
  • Her employer pays Beth £140 for the days she works.
  • And for the time she is not working (3 days or 60%, worth £210), she will also earn 2/3, or £140, bringing her total earnings to £280, 80% of her normal wage. 
  • The Government will give a grant worth £70 (1/3 of hours not worked, equivalent to 20% of her normal wages) to Beth’s employer to support them in keeping Beth’s job. 

If you would like further information about the Job Support Scheme please contact us on the details below

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

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Supporting our clients then, now and in the future

COVID-19 has presented many businesses with unprecedented challenges. Here at Ad Valorem, we recognised very early on in the pandemic that we had two main priorities; supporting our clients during this time of uncertainty and economic change, and also ensuring the wellbeing of our team. 

Due to our investment over the last couple of years in cloud technology, the transition from office to home working was swift. Most members of staff were able to adapt to working from home within a matter of hours, with our entire team being fully operational only two days after we took the decision to close our office on Monday, 16th March. 

Uncertainty is one of the biggest threats a business can face, and we understand that being a business owner can sometimes be an extremely lonely place. We therefore made it our first objective to contact all clients, whether business owners or self-employed individuals, to act as a sounding board for their concerns and to provide relevant advice for their particular situation. 

In the early days and weeks of lockdown, information was released daily from the government regarding the support being launched for business owners. The daily press releases often provided little detail on this support which we thought could result in business owners finding it difficult to identify what support was applicable to them and how to apply for it. To provide clarity around the government initiatives, we provided detailed weekly guidance emails, along with our Ad Valorem COVID-19 Support Guide, which outlined the support available for different business types and sectors, highlighting eligibility criteria and how to apply for the schemes. 

We fully appreciate the enormity of the impact COVID-19 has placed on businesses and understand that the Job Retention Scheme has particularly helped many of our clients through the lockdown period. As the lockdown has proven to be one of the most significant challenges for business in the 20 years we’ve been established, we are extremely proud and grateful that we didn’t furlough any of our employees and kept our team fully contactable for our clients. In fact, over the lockdown period we’ve welcomed seven new starters across all areas of our practice from payroll, to accounts and tax, to our specialist R&D team. 

As well as focusing on our clients, we have also launched in-house initiatives to take care of our amazing team. Working from home often sees the working day extend into usual social time, resulting in a decrease in exercise. We therefore introduced the Ad Valorem ’Step Challenge’, where employees were targeted with walking a number of steps per week, with a prize available if maintained over the month. Prizes included local business vouchers to support the community economy when lockdown restrictions reduced accessibility and water bottles to encourage a healthy lifestyle. We also hosted family quizzes over Zoom, which kept our more remote team members in touch with each other. 

As lockdown begins to ease and business slowly starts to return to normal, we would like to take this time to reflect and thank both our wonderful clients and amazing team for their continued support and hard work over the last six months. We will continue to support our clients in line with the new normal and are ready for any potential challenges the coming months may bring. 

Digital accounting enables you to access your numbers anytime, anywhere and on any device with an internet connection. If you’d like more information about digital accounting, please contact us using our details below. 

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