Are R&D Tax Credits being affected by the coronavirus COVID-19 outbreak?
In light of the coronavirus crisis, the government has made some adjustments regarding R&D Tax Credits. The scheme itself has been around since the early 2000s, but these changes have raised questions about their effect on new and existing claims.
Essentially if any of your clients have undergone an innovative project recently, involving any scientific or technological research, them they may well qualify for the relief. Take a look at the details on our R&D Tax Credits page to get the background.
Expanding the scope of eligible R&D costs
As part of the recent updates, the government has said it be consulting on whether expenditure on cloud computing and data should attract R&D Tax Credit relief. The consultation and results will be made available in due course.
Back in the Budget of 2018, it was announced that the amount of R&D Tax Credit relief that a company can receive through the SME scheme per year will be capped to help prevent abuse. This cap was set to be three times the total NICs and PAYE liability of the company.
In the spring of 2019 a consultation took place about this new cap. Once the responses had been reviewed, it was then unveiled in the Spring 2020 Budget that adjustments would be made to the PAYE cap designed to minimise the impact on genuine claims. Additionally, the cap will now be delayed until April 2021 to provide more time for further consultation.
Common questions around coronavirus and R&D Tax Credit claims
During the course of the COVID-19 outbreak, we’ve found a number of questions have been coming up regularly which clients have been asking. To help, we’ve added them here together with the answer.
1. Due to the coronavirus pandemic my business is no longer a going concern. Can I still claim R&D Tax Credits on my past innovation activities in order to inject some much needed cash back into it?
The Going Concern rules are based on an organisation’s most recent set of accounts submitted to Companies House. As this will be prior to the COVID-19 outbreak, there shouldn’t be any impact on the company’s ability to claim R&D Tax Credits. HMRC have also made it clear they will be monitoring the impact of the pandemic to see how it affects a company’s Going Concern requirement. This will allow your client to adjust their reaction accordingly if required.
2. With coronavirus causing a large amount of disruption, how long is HMRC taking to process R&D Tax Credit claims?
Although there has been a huge amount of pressure on HMRC in light of the COVID-19 crisis, operationally things are working well. Around 95% of R&D Tax Credit claims are still meeting the 28-day target as usual with day 1 starting from receipt of the application. Various contingency plans have also been put in place to maintain capacity going forward, and extra resource is being put into processing R&D Tax Credit applications as quickly as possible.
3. My company already owes outstanding tax to HMRC that isn’t R&D related. Will this still be collected from my R&D tax relief in light of the COVID-19 situation?
This depends on whether your client is claiming using the SME scheme or the RDEC scheme. For those using RDEC, the usual set-off rules will continue to apply. However, HMRC is still considering their position regarding those using the SME scheme. The outcome will hopefully be made public soon.
4. Will claiming the Coronavirus Business Interruption Loan Scheme (CBILS) affect a current claim for R&D Tax Credits?
Yes, R&D Tax Credits can still be claimed by companies that have received CBILS funding. However, the branch of the scheme they will need to use may change from SME to RDEC because the CBILS is a notified state aid. The RDEC scheme is unfortunately less generous than the SME one, however it can still represent a sizeable and much appreciated financial boost. HMRC have advised that they will monitor and review this rule going forward, so if it applies to your client it’s worth double checking. If you have any questions regarding this, please do get in touch with us before using the Tax Cloud portal so that we can discuss the potential impact upon the company’s R&D tax claim due to their CBIL claim.
Now more than ever, make sure your client is receiving their full entitlement
Finding the time to study R&D tax legislation in detail and applying it to your client’s specific circumstances can be time consuming to say the least. Even for the most competent of accountancy professionals, R&D tax pitfalls are hard to spot and under-claiming is surprisingly easy. Even if your client has claimed before, each R&D project will be unique and having the time and resources to assist them effectively is extremely difficult. Again, this is where Myriad Associates (the name behind the Tax Cloud portal) is here to take the strain.
How the Tax Cloud portal is helping accountants up and down the UK
For business accountants all over the country, work could not be busier. With all the COVID-19 uncertainty, trusted accountancy firms will often be the first port of call for everything from tax returns and reliefs to cash flow and liquidation. R&D Tax Credits however is an incredibly niche tax relief that is constantly changing and the rules are often not easy to interpret. That’s where the Tax Cloud portal for accountants comes in.
Simply log in and enter your clients’ details and figures and the Tax Cloud portal will guide you through the claims process in an accurate, maximised and watertight way. Not only does this mean your precious time and resources can be directed elsewhere, you also know your clients are getting the best accountancy service possible. It’s a low fee and efficient way of claiming, and the Myriad Associates team of specialist R&D accountants and advisors are on hand to help if needed.