HMRC has given us a comprehensive update on the R&D Tax Credits scheme. Here’s everything you need to know.
SME scheme – all systems go
The biggest news first: HMRC is processing claims for the SME scheme at regular speed.
After more than two weeks of lockdown, HMRC has stuck to its pre-pandemic target of processing 95% of applications within 28 days.
This news is good for two reasons. First, and most importantly, it means that thousands of SMEs which depend on R&D Tax Relief – many now more than ever before – will still receive their money. And most of them in good time.
Secondly, it’s now clear how well-equipped HMRC is to deal with the lockdown. Sticking to this target, even as its entire staff made the transition to remote working, shows HMRC’s adaptability and commitment to the SME scheme.
Now this period of peak disruption has passed, it’s full steam ahead for HMRC.
In fact, as we explain in this blog, there’s never been a better time to claim R&D Tax Credits.
Note: While HMRC’s update didn’t mention the RDEC scheme, we assume it is also running normally.
HMRC has also drawn up contingency plans to keep things running smoothly.
These plans include making additional resources available so that processing times for the SME scheme are kept on target.
So, for now, it’s safe to say that the SME scheme is well-protected from the Coronavirus.
Late claims: some may be accepted
HMRC says it will be ‘sympathetic’ to companies which miss the deadline for filing for R&D Tax Credits on account of the pandemic.
Companies have to file for R&D Tax Credits within a year of the end of the financial period in which the development work happened. This hasn’t changed. But given the situation, HMRC may be able to accept certain late claims from businesses impacted by the Coronavirus.
In terms of procedure, companies which can’t file by the usual deadline must submit their claim as soon as possible. HMRC will then apply a set of criteria to determine whether their application can be accepted. These criteria are part of HMRC’s Statement of Practice – available here in full.
Essentially, HMRC can accept claims that were late for reasons beyond the company’s control. Illness and absence of key personnel feature heavily in this list of acceptable reasons.
If senior members of your finance and accounting teams were laid low by the virus, and there was no way you could have filed sooner, then HMRC might accept your application.
CBILS and R&D Tax Relief
There’s been a lot of confusion about how the Coronavirus Business Interruption Loan Scheme will interact with R&D Tax Credits.
CBILS is notified state aid. Under EU rules, companies aren’t allowed to receive more than one kind of state aid for the same project. So, if a development project is funded by a CBIL, it can’t be claimed for through the SME scheme. It can be claimed for through RDEC, though.
According to HMRC’s update, the question seems to be whether the CBIL was taken out to fund development work, or to cover more general business costs.
In many cases, of course, things won’t be so clear cut. So HMRC has promised to look at the facts of the claim and will make decisions on a case-by-case basis.
The ‘going concern’ requirement
To be eligible for R&D Tax Credits a business has to be a ‘going concern’, according to its last set of published accounts.
This has been causing issues for some businesses, who have asked HMRC whether this requirement could be waived under the circumstances.
HMRC has responded, saying this is a statutory requirement, and therefore out of its control. However, HMRC has asked companies to let it know if this is causing ‘genuine operational difficulty’, which suggests there may be some wiggle room.
Keep up to Date
That’s all from HMRC for now. But we’re expecting more updates soon.
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