The UK Government have deployed a raft of measures that are designed to assist companies, by ensuring that they have access to funds which will hopefully help them to remain solvent during the coming months.
In addition, HMRC have strengthened the teams within the R&D Tax Credit offices, resulting in claims being approved sooner.
One of the new initiatives that has been made available to businesses, is the Coronavirus Business Interruption Loan Scheme (CBILS). CBILS is support aimed at SMEs with business activities based in the United Kingdom and have a turnover of LESS than £45million.
This essentially works by allowing businesses to access a business loan of up to £5million, of which the first 12 months is interest free. The list of providers is extensive, to make accessing this resource as easy as possible.
With the list of providers being so extensive, most businesses are able to access this through their bank.
CBILS is a form of State Aid, and unfortunately there are restrictions on the amount of state aid that companies can receive, and as R&D Tax Credits are also considered a form of Notified State Aid, it’s important to understand your rights along with how to maximise the benefit to you.
With regards to the SME R&D Tax credit scheme, the level of tax benefit is affected when in receipt of grants and subsidies, by restricting the amount of qualifying expenditure that you are entitled to. The receipt of a grant or subsidy that is Notified State aid will result in the exclusion of all of the relevant project expenditure from the SME regime.
As a result of these rules, when obtaining CBILS in relation to a specific R&D project, this will impact a business’s ability to claim R&D Tax Credits for that project. This can manifest as a significant reduction in the R&D relief that you will receive in the future.
However, SMEs who are in receipt of CBILS for a specific R&D project may still qualify for R&D Tax Credits under the Research and Development Expenditure Credit (RDEC) scheme. This is still a tax benefit, but it is not as generous as the SME scheme.
As a comparison, the benefit of the SME scheme is up to 33%, whereas under RDEC, the benefit is 10.53%.
The good news is that you don’t need to elect into or apply to defer your VAT payment, as this happens automatically.
This essentially means that you can hold off paying any VAT that would usually be owed, between the 20th March 2020 to the end of June 2020, until the end of your 2020-21 tax year.
Usually, any R&D Tax Credits that a business would be in receipt of would be offset against other tax liabilities, however, and here’s the really good news, tax credit received through both the SME and RDEC schemes will NOT be subject to this rule and be used to offset against deferred tax, under this COVID-19 Coronavirus scheme.
Under this news scheme, the UK Government has pledged to help employers to cover staff wages, by paying up to 80% of their wage, pension contributions and National Insurance payments, up to a maximum of £2,500 per worker, each month.
This scheme will be backdated to the 1st March 2020 and will initially be available for three months, however, could be extended if necessary.
As staff wages make up an important part of the R&D Tax Credit calculation, any salaries paid to staff whilst on furlough will need to be omitted from the final calculated costs.
As with all decisions that we make in relation to our businesses, it’s vital to weigh up the benefits. We would be happy to discuss your specific situation and advise on the best way to maximise your future R&D Tax Credits claim.
Why not contact us today to discuss how we could help your business to claim R&D tax relief? It only takes our team around 20 minutes to determine if you are eligible or not.