Businesses who have research & development projects have also been hit hard by the coronavirus pandemic.
These projects often receive separate relief from the government in the form of SME R&D relief, or Research and Development Expenditure Credit (RDEC).
The Different R&D Reliefs Available
The SME R&D relief is for SMEs with less than 500 staff, and a turnover of under 100millions euros (or a balance sheet total under 86million euros).
This relief allows a company to deduct an extra 130% from their qualifying costs from their yearly profit, as well as the usual 100% deduction. They may also claim a tax credit if the company is loss making.
The RDEC is a tax credit for large companies of their qualifying R&D expenditure. This has been increased to 13% from 1 April 2020.
Can You Get COVID Loans Alongside This Relief?
HMRC have sent out an update that explains what happens if a business, in receipt of this relief, takes out any support available that is related to the COVID crisis.
If a Research & Development project is, in any way, funded by State Aid then the whole project will not be allowed to be claimed through the SME relief Scheme.
Instead it must be claimed through the RDEC relief instead.
CBILS & Bounce Back Loans
The CBILS (Coronavirus Business Interruption Loan Scheme) and the Bounce Back Loan Scheme are both considered State Aid relief.
That means that the above applies.
If a business has received either of these loans, and any amount has gone towards the research & development project, the whole project cannot be claimed through the SME scheme – only the RDEC scheme.
The Future Fund
The Future Fund is not classed as State Aid, and so any amount from that which has been put towards your project doesn’t need to be considered when preparing a claim for R&D relief.
Tax can be deferred for a specific regime to support businesses in the COVID-19 period. Examples of this would be the ITSA payment on account, or the VAT quarterly payment deferral.
In these instances RDEC or payable tax credit will not be set against any of those amounts before the revise due date.
Time To Pay Arrangements
If tax is deferred as part of a Time To Pay arrangement any R&D tax credit will be set off against any time to pay liability.
It’s worth noting that this is not just the amount owed at the point in time the credit is paid.
Time To Pay doesn’t change the fact that debt is owed to HMRC, nor does it change the due date.
It is simply an agreement by HMRC to delay enforcement proceedings towards a company.
R&D Expenditure Credit Set Offs At Step 6
RDEC remaining at step 6 must be set off against any liability owed to the Commissioners for HMRC.
HMRC does not have the power to provide for a temporary relaxation of this rule.
We hope this has helped you to navigate the different grants and loans, alongside any R&D relief your business is in receipt of.
Do get in touch if you have any more questions below.
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