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COVID-19 Support: Implications to R&D Claims

  • June 2021
  • 2 minutes

taxqube Business Interruption Loans for Coronavirus

Companies that take out a loan via the Coronavirus Business Interruption Loan Scheme must ensure they are aware of how it may impact on the size and scope of their R&D claims.

A notified state aid will be a Coronavirus Business Interruption Loan (CBIL). This means that any CBIL funds used for R&D could be limited to the less favourable RDEC scheme (for SMEs). In practise, this means that an R&D claim’s “cashback” could be reduced by as much as 23p for every qualifying pound spent.

To prove the source of funds used for R&D costs and avoid a restriction on a future claim, documenting the purpose of the loan when making a loan application, and then keeping records and/or segregating funds is recommended.

taxqube Furloughed Employee Costs

Money received under the Coronavirus Job Retention Scheme for furloughed employees who would normally carry out R&D will also be ineligible for R&D tax relief claims. Because furloughed employees are not permitted to work, they will not be engaged in R&D during that time, and their salary (including any discretionary top-ups on top of the 80% ) should not be included in an R&D claim.

Businesses should keep track of how much time each employee spends on R&D so that costs can be split appropriately.

taxqube Small Business Grant Funding

State aid is defined as a £10k grant for businesses receiving Small Business Rates Relief or Rural Rates Relief. If the funds are used to pay for a portion of the R&D project, the R&D claim will be limited to the amount of these funds. It’s possible to file an RDEC claim.

If some of the £10k grant money will be spent on R&D, it’s critical to keep track of how much was spent on R&D to avoid having the entire £10k restricted to an RDEC claim.

taxqube Retail, Hospitality and Leisure Grant Funding

Businesses in receipt of the extended retail discount will be eligible for £10-25k grants per property if its rateable value is less than £51k. Once again, this is defined as state aid and using these monies to fund R&D expenditure will limit an R&D claim.

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