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R&D tax relief in the post-COVID era

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Lockdown is over, furlough is finishing, offices are opening up and life is returning to normal—all causes to celebrate! However, in the R&D tax relief sector the fallout from COVID is only just beginning to bite.

Government funding to support businesses during the COVID crisis started to be available in April 2020, which means that, 18 months down the line, we’re starting to see significant numbers of R&D claims coming through that are affected by this funding. Depending on what the funding was and how it was applied, these effects range from nothing at all to pushing an entire claim into the RDEC scheme. 

We’ve written about COVID and its effects on the R&D tax relief scheme many times over the past year and a half, but as our clients start to grapple with these issues in earnest, we wanted to bring together all of this advice into one place.

COVID loans and furlough payments

First, this is a good place to state HMRC’s position on how to treat most COVID funding: 

“…[CBILS, BBLS and the Large Company Loan Scheme]… are all notified State Aid, meaning that S1138(1)(a) CTA 2009 could potentially prevent a claim for SME relief. HMRC would only expect this to happen where the loan relates specifically to the company’s expenditure incurred on an R&D project rather than providing general support for the company…”

This suggests that HMRC will not be taking a hard line on these subsidies, but until these claims start being enquired into, we can’t be sure! Even in light of this, the advice we’ve given throughout the year still stands:

  • CBILs and BBLs loans still have the biggest impact on claims—our advice on how to handle these can be found here and here
  • The recovery loan scheme has a lesser effect, as it was created post-Brexit—more information on this can be found here.
  • Furlough payments have no direct effect on an R&D claim, but they do have to excluded from the costs—our advice on how to do that is here 

Other advice and insights

Alongside this more direct advice, we’ve continued to share our insights and observations on the effect of the COVID crisis on R&D tax relief claims and our clients:

  • For our advice on how grants and R&D funding interact, see here
  • For our take on how COVID affected the R&D tax relief sector as a whole, see here

Finally, for a more personal take, this blog talks about how Ian from our customer support team has supported his own private clients through the crisis.

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