We answer your most pressing questions about the Coronavirus’ impact on the R&D Tax Credits scheme.
We will be updating this blog regularly with all the latest information.
- How will the Coronavirus affect my claim?
- What happens if I defer my corporation tax?
- Are there any penalties if I defer VAT or other kinds of liabilities?
- What if I receive a CBILS, CLBILS or Bounce Back loan?
- Will my claim be affected if I receive Future Fund investment?
- Does the Job Retention Scheme impact my claim?
- Will the Business Rates Holiday affect my claim?
- Will my claim be affected if I receive a cash grant?
- Is GrantTree still working on my claim?
How will the Coronavirus affect my claim?
HMRC recently shared a comprehensive update on the R&D Tax Credits scheme. The most important news is that HMRC is still hitting its target for processing times, handling 95% of claims within 28 days.
This is good news for businesses which rely on R&D Tax Credits to extend their cash runway.
More good news – the agency said it will show some leniency to companies that have to file a late claim on account of the virus. You can read more about that in the update from HMRC.
HMRC may run into problems if there’s a large increase in the number of claims, though.
As companies look for new sources of cash to offset lost revenue, we’re likely to see a greater uptake of R&D tax credits. Processing times may increase if that happens, but it seems HMRC are in a good place to handle the extra load.
If you want to access your R&D Tax Credits early – up to three months before your year-end – check out GrantTree’s R&D Advance Funding service.
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 worried about paying their taxes on time.
Given the situation, the government will allow many businesses to defer their tax liability. However, HMRC has stated it will follow existing policy by offsetting any R&D Tax Credits due against and tax owed by the company.
So, if you are due a tax credits payout, but have agreed to postpone your tax liabilities, the tax credits you will be paid will be reduced by however much tax you owe at the time.
Whether you should claim R&D Tax Relief immediately or defer your tax payments is a complicated financial decision.
But bear in mind 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 tax for the period in which you conducted R&D, you won’t be getting a tax discount. You’ll receive a cash credit instead.
What if I defer VAT or other kinds of liabilities?
If you defer VAT or ITSA payments it will not affect your R&D Tax Credit claim. You will receive the full tax credit owed to you. Deferring your payments will not be used to offset against any liabilities you owe HMRC.
Will my claim be affected if I receive a CBILS, CLBILS or Bounce Back loan?
The government has launched three loan schemes for companies facing financial hardship: the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS), and the Bounce Back Loan Scheme.
Managed by the British Business Bank, these schemes provide government-backed loans with favourable interest rates through a network of lenders.
These three schemes have now been designated as ‘notified state aid’. This means that if companies use money from these loans to fund development work, RDEC rules would apply.
There is still some uncertainty, here, and we know that HMRC will be looking at claims on a case-by-case basis. We will have a better idea once a few of these claims have been processed, and we’ll update this blog with all future guidance we receive.
The CBILS, CLBILS and Bounce Back Loan Scheme are just a few of the ways the government is helping businesses during the pandemic.
Will my claim be affected if I receive Future Fund investment?
Future Fund investment, delivered as convertible loan notes provided by the government and private investors, is considered ‘commercial’.
It will not impact your eligibility for tax credits or your claim.
Does the Job Retention Scheme impact my claim?
Furloughing workers and taking advantage of the Coronavirus Job Retention Scheme won’t impact your eligibility for R&D Tax Credits.
The scheme is designed to protect jobs and won’t interfere with other kinds of government support.
However, you are not allowed to claim R&D Tax Relief for wages for employees while they are on furlough. This is because furloughed staff must cease all work for their employer, meaning they can’t participate in development work.
There is an exception to this, however; if the employee is sick or on holiday.
Will the Business Rates Holiday affect my R&D Tax Credits claim?
No need to worry. 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.
Will my claim be affected if I receive a cash grant?
No. The cash grants for companies in the retail, hospitality and leisure sectors are ‘no strings attached’. So they don’t affect your eligibility R&D Tax Credits.
However, if you receive grant funding for your R&D work – say from one of the schemes financing innovation against the Coronavirus – your R&D claim will be impacted.
In that case, the best thing to do is speak to a specialist.
Is GrantTree still working on my claim?
Yes, absolutely! We’ve closed our office, but it’s business as usual for GrantTree.
We’ve practised a policy of flexible working – where partners can work wherever they want, whenever they want – for a few years now.
That means, thankfully, our entire company was set up to work remotely from day 1.
Our team might be at home (we hope they’re at home!) but they’re just as productive as ever.
If you want to know the status of your claim, or have any questions about it, please reach out to your Account Manager.
More questions about your claim?
Still have more questions? Drop us a line, and one of our R&D Tax Credits experts will be happy to help.