Q&A: will Covid19 affect my R&D tax relief claim?

With many companies currently turning to R&D tax relief as a way to inject crucial cash back into their business, we've received many questions from clients on how Covid-19 might affect their R&D claims in the short and long term.

06 April 2020

accountancy sheet and magnifying glass

Here we share with you the answers we received from HMRC...

1 - How long will HMRC take to process my claim amongst Coronavirus disruptions?

There is good news here. HMRC staff are currently working both remotely and on-site so as to maintain as much function as possible during the outbreak. The good news is that they're currently prioritising SME tax credit claims and currently meeting their target to have those claims processed within 28 days of submission to HMRC. So, right now, there will be minimal impact on HMRC’s ability to process claims to their usual timeframes, so make sure you make arrangements to have your claim processed as soon as you can.

2 - I currently owe HMRC in other areas (not R&D related), are they still going to collect this from my R&D tax benefits in view of the current Coronavirus situation?

For companies that claim through RDEC, there is no change and the set-off rules that apply will continue to apply. For companies that claim under the SME scheme, HMRC are still considering their position on this. The hope is that they might prioritise payment of R&D tax credits over collection of other liabilities, and we will keep you updated on any developments.

3 - I’m no longer a going concern due to the pandemic, can I still claim R&D tax relief on my past innovation work and release some vital cash back into my business?

The Going Concern rules are based on a company’s last set of accounts submitted to Companies House. Since most of these will have been submitted prior to the Coronavirus outbreak, there should not be any impact on your ability to submit your R&D tax claim. On a positive note, HMRC have told us they are monitoring the impact of the pandemic to see how this affects companies’ ability to meet the Going Concern requirement, so that they can adjust their reaction accordingly, if necessary.

4 - I’m claiming the Coronavirus Business Interruption Loan Scheme (CBILS), will this affect my current R&D tax claim?

You can still claim R&D Tax Credits if you receive CBILS funding, however, the CBILS is a notified state aid and as such, could affect your ability to claim as an SME like any other grant would. It's likely that companies who use CBILS funding specifically on eligible R&D projects (as opposed to being used to generally support the company), may have to claim under the less generous RDEC scheme on those projects. HMRC have advised that they are monitoring the application of this rule, and we will keep you updated on any further developments. In the meantime, if you have any concerns, you can speak with us prior to submitting your application for the funding so that we can explain the potential impact upon the company’s ability to claim as SME as a result of the CBIL.

We hope the above has clarified a few things on how Covid19 might impact your R&D tax claim. The government introduced a wide range of funding support to help businesses respond to the impact of Covid19. Some of these might affect your R&D tax claim, so best thing to do is get in touch with ABGI, we can take a look at your individual circumstances and advise on the best way forward.