24 Apr 2020

R&D relief at risk if you receive a loan under the Coronavirus Business Interruption Loan Scheme

ResearchandDevelopment-MHA-Monahans

Cash has always been king, but even more so now in these unprecedented times.

Research & Development (R&D) tax reliefs can provide cashflow to your business. However, there has recently been some confusion over whether this relief will be affected by any of the Covid-19 Government schemes.

It has recently been confirmed that the Coronavirus Business Interruption Scheme (CBILS) is a scheme that will have a direct impact on R&D tax relief. This is due to the EU State Aid ruling which prohibits a company receiving two kinds of state aid at the same time.

HMRC clarified its policy, which is to disqualify companies using CBILS to fund research or development from R&D tax relief under the advantageous SME scheme.

We urge you to assess whether your business can realistically survive the immediate crisis without using the Covid-19 schemes. If the answer is yes, it might be sensible to forgo using the CBILS scheme to avoid the disqualification of R&D tax relief.

It will still be possible for a company claiming CBILS support to access R&D relief under the R&D Expenditure Credit (RDEC) scheme as this less generous form of relief is not classed as state aid. Whereas this scheme provides 10p for every pound of qualifying spend, the SME tax relief scheme offers 25p in the pound if the company makes a profit, and 33p if it makes a loss. This makes it especially useful for start-ups that are not yet profitable.

To find out further information regarding how to qualify for R&D and RDEC, please visit our R&D hub.