Claiming R&D Tax Credits represents a genuine and welcome way that eligible organisations can boost cash flow during the current Coronavirus pandemic lockdown. Ian Batkin updates on the current options and situation.
We know that businesses are feeling the financial strain in these difficult times. Businesses that have and are investing in product, process or service innovation development strategies are eligible to claim R&D Tax Credits through the government’s well-established scheme(s), which could represent a beneficial cash boost and financial lifeline in these challenging times.
What do you need to know now?
• Businesses can bring forward their R&D claim submissions, which is particularly relevant for SME’s when claiming payable cash credits
• HMRC has advised that it is experiencing some pressure on operational resources, but it’s commitment and priority is to maintain clearing 95% of SME Tax Credit claims within 28 days.
• HMRC has implemented contingency plans to support this, including allocating additional resources to deliver on this aim.
What about other liabilities to HMRC?
For companies making SME R&D Tax Credits claims, HMRC is taking this into consideration, and says it will prioritise payment of R&D Tax Credits over the collection of other tax liabilities in the current pandemic. For RDEC claims, the offset is required and will therefore continue.
Does the Coronavirus Business Interruption Loan Scheme have an impact on SME R&D claims?
The Coronavirus Business Interruption Loan Scheme (CBILS) forms part of the state aid under the European Commission’s new temporary framework for COVID-19. Companies that would usually make R&D Tax Credits claims under the SME scheme could, under certain circumstances, be forced to claim under the less generous Research and Development Expenditure Credit (RDEC) scheme, which is generally / mainly used for larger companies.
The critical factor will be whether the CBILS relates specifically to the company’s R&D project or R&D expenditure, or whether it will be intended to be used more generally to support the business. If the latter, we would expect that R&D Tax Credits should still be available. Outlining the purpose of the loan will be key to maximizing the potential relief over the next 18 months. HMRC has said it will be monitoring the application of this rule and welcomes feedback.
What about the ‘going concern’ status of the R&D Tax scheme for SMEs?
It is a statutory requirement that companies making R&D Tax Credit claims can certify that the business is a going concern, which means that HMRC cannot ignore the claim. In addition:
• HMRC’s latest update indicates it will look to the last published accounts. In many cases, these will have been prepared before the effects of COVID-19 and there should therefore be no impact on the going concern requirement.
• Companies are able to submit claims now even if there is doubt about the current going concern status due to any uncertainty surrounding coronavirus.
• The position is less clear for companies in the process of finalising accounts. HMRC is monitoring the impact of the pandemic on customers’ ability to meet the going concern requirement and suggest that if a business falls into this category they should contact HMRC if this is causing genuine operational difficulty.
Support during the Coronavirus crises – please get in touch
Luvo Financial is an independent specialist tax practice and we are more than happy to provide advice and/or discuss any of the above, by phone, during the current lockdown as part of our no obligation, free initial consultation service.We work with and through a number of small and medium-sized firms of Accountants and their clients; we have a 100% claims success record, work on a contingent (no-win-no-fee) basis and only charge when an engagement to provide support is agreed with a client.
If you would like to find out more about how Luvo Financial can work with and help you to make worthwhile and financially valuable R&D Tax Credit claims, please get in touch with a member of our team.