The majority of businesses have had to make big changes to the way they operate over the past year during the Covid-19 pandemic, with many turning to government grants and subsidies for much-needed financial support. So does receiving Covid-19 grants/subsidies compromise securing R&D tax credits?
Well, the answer is – it depends. A company might not qualify for SME R&D reliefs if it has received grants or subsidies, especially if they’re for the project they are claiming.
Coronavirus Job Retention Scheme (CJRS): Under CJRS, staff mustn’t be working so any claim for employee costs will fail as HMRC will know these workers were not contributing to R&D projects. However holiday and sickness pay may be claimable. Use of the CJRS does not preclude an SME R&D claim.
Coronavirus Business Interruption Loan Scheme (CBILS): CBILS is classified as notified state aid, i.e. aid which has been approved by the European Commission. Use of CBILs does not affect a company’s R&D claims so long as the loan money is not spent on any project related to the R&D claim. If it does, then the project won’t qualify under the schemes designed for SMEs although the business could still claim under the government’s Research & Development Expenditure Credit (RDEC) scheme.
Bounce Back Loans (BBL): BBLs are classified as ‘de minimis’ forms of state aid i.e. they are regarded as a subsidy for the first year’s interest and fees and dependent upon the use of the funds they may affect future R&D tax credit claims.
Take up of Government grants and subsidies as well as the use of schemes such as the Enterprise Investment Scheme can affect any R&D tax credit claim and our recommendation is you take professional advice due to the complexity of the rules surrounding these.
For further information please contact Carla Hobby on 01202 715950.
This article is featured in the September edition of the Dorset Business Focus magazine. Read on the online version here.