The Coronavirus pandemic has created lots of uncertainty, particularly around company finances and government funding. Many clients are asking about the impact on the R&D Tax Credits scheme. We have tried to answer your questions below, however the situation is constantly changing, so please contact us to talk to one of our specialist team about your existing R&D claim or making a new R&D claim.
How will the Coronavirus affect my R&D Tax credits claim?
We do not believe that the current situation should affect your R&D claim.
HMRC will be up and running throughout the crisis. Most of HMRC’s staff are working from home, but the agency is set up for remote working, so there shouldn’t be much disruption.
There might be a slight increase in processing times, however we haven’t noticed one yet. We expect R&D Tax Credits claims to be processed without issue.
The one issue HMRC may run into is a large increase in claims. As companies look for new sources of income to offset lost revenue, we’re likely to see a greater uptake for R&D Tax Credits. If that happens, processing times could be stretched.
What happens if I defer my Corporation Tax?
The government has expanded its Time to Pay service by adding more staff and launching a new helpline – 0800 0159 559 – for companies concerned about paying their taxes due to the outbreak.
Given the situation, the government is likely to allow many businesses to defer their tax liabilities. However, deferring your corporation tax bill will probably impact your R&D Tax Credits claim.
Exactly how depends on your financial situation. If you have a large corporation tax bill and a small claim, your relief is likely to be withheld until you settle your corporation tax, PAYE and VAT bills. Conversely, if you have a large claim and a small corporation tax bill, you should be able to surrender your losses and receive a cash credit.
Whether you should claim R&D Tax Relief immediately or defer your tax payments is a complex financial decision.
Bear in mind, though, that your window for claiming R&D Tax Credits is limited. You have up to two years after the end of the accounting period in which your R&D took place to file a claim. After that, you’ll lose the credit forever.
And if you’ve already paid corporation for the period in which you conducted R&D, you won’t be getting a tax discount. You’ll be getting a cash lump sum instead!
Will my R&D Tax Credits claim be affected if I claim a CBILS loan?
The government has launched the Coronavirus Business Interruption Loan Scheme, or ‘CBILS’. Scheduled to launch next week (w/c 23rd March), the CBILS is a new scheme designed to help companies facing financial hardship because of the pandemic.
Managed by the British Business Bank, the scheme provides government-backed loans with favourable interest rates through a network of lenders.
The good news is that you will still be eligible for R&D Tax Credits if you receive a CBILS loan. However, you won’t be able to claim R&D Tax Relief on any loan money you spend on qualifying development work. The reason being you can’t claim R&D Tax Credits on subsidised costs.
You can still claim R&D Tax credits overall, but you’ll have to subtract however much of the CBILS loan money you put towards your qualifying expenditure from your claim.
For example, if your qualifying expenditure was £1 million, but £200,000 of that was funded by your CBILS loan, you should only claim R&D Tax Relief on the £800,000 you financed by other means.
Will the Business Rates Holiday affect my R&D Tax Credits claim?
R&D Tax Credits are a relief on corporation tax while Business Rates are charged on property. The two aren’t connected and don’t affect one another.
If I receive a Cash Grant because of the Coronavirus, will it affect my R&D Tax Credits Claim?
No. The cash grants the government is giving to companies in the retail, hospitality and leisure sectors are ‘no strings attached’. So they don’t affect your eligibility R&D Tax Credits.
Receiving certain kinds of grants can affect your eligibility for R&D Tax Credits, though.
If you’re not sure whether you’re eligible, or are worried about claiming, the best thing to do is speak to one of our specialists.
Are Finch & Associates still working on my claim?
Yes absolutely. We are operating business as usual, albeit from home, as set out in the government guidelines. If you would like to discuss an existing claim or make new R&D Claim please contact our team of tax advisers who are experts in assessing and making claims for R&D Tax Credits. Please call the team on 01275 867350 or send us a message now.