Coronavirus Support Measures and R&D Tax Credits | Can You Still Make an R&D Claim?

Many companies have been recipients of government-funded support during the coronavirus crisis. This raises the question – can a company utilise both coronavirus support measures and R&D Tax Credits. The answer depends on the type of support being received, how much of it, and whether it is specific to your R&D project. If you want to find out more about R&D Tax Credits - check out this page on our website.

Each of the support measures, and what impact it has, will be covered below. This blog includes Coronavirus support measures from across the UK, including measures specific to Wales. From the Bounce Back Loan to the Business Interruption Loan Scheme, the Welsh Economic Resilience Fund, and more. But to fully explain the impact – first, you need to know about Notifiable State Aid. Whether a support measure is Notifiable State Aid will be the biggest factor in determining how it will impact your R&D Tax Credit claim. If you already know all about State Aid – skip ahead to the Coronavirus support measures and R&D Tax Credit section below.

If you are using any of these support measures, I recommend you contact us now so that you are able to plan effectively for any future R&D Tax Credit claim.

Notifiable State Aid for Coronavirus Support Measures and R&D Tax Credits

Due to regulation designed to allow EU business to compete on a level playing field, certain types of business support schemes need to be notified to the EU. These are notifiable state aids. The Small and Medium sized-Enterprise (SME) R&D Tax Credit scheme qualifies as notifiable state aid. If a company is already receiving one type of notifiable state aid to support a project, then there are restrictions on other types of state aid.

This means if you utilise a coronavirus support measure which qualifies as notifiable state aid, you may not be able to use the SME R&D Tax Credit scheme. But there are two very important caveats here.

1. De Minimis Staid Aid

If you receive smaller values of a Notifiable State Aid – they may be considered De Minimis. Usually, De Minimis is less than €200,000 over 3 years, and if that is the case, it isn’t formally notifiable to the EU commission. Where your state aid is De Minimis, you can continue to receive other types of state aid. If you are eligible for SME R&D Tax Credits – you can claim these on any projects costs which aren’t covered by the state aid already received.

So if any Coronavirus funding you have recieved is De Minimis state aid, then you may still be eligible for SME R&D Tax Credits on costs not covered by the funding.

2. Notifiable State Aid and RDEC

Research and Development Expenditure Credit (RDEC) is a type of R&D Tax relief which is normally used by larger firms. RDEC isn’t a notifiable state aid. This means you can still claim RDEC, even if you are already receiving a Notifiable State Aid – which includes some Coronavirus support measures.

The rules around Notifiable and De Minimis State Aid can be complicated. For example, it isn't always clear whether any state aid covers the same costs as your R&D Tax Credit claim. If you require specialist advice – reach out and we can advise you on how to proceed.

Furloughed Staff and R&D Tax Credits

HMRC recently confirmed that staff members who aren’t working (i.e. furloughed) due to Coronavirus are not eligible to be included in R&D Tax Credit claims. For example – it may be the case that your R&D project continued throughout 2020. However, one of your staff was furloughed, and their salary was topped up out of the companies’ pocket. Because the employee wasn’t present and conducting R&D – any costs associated with them aren’t eligible for your claim.

It’s also worth noting that you may have key staff members absent at this time. This can make it more difficult to make your R&D Tax Credit claim. If this is the case, Zest can advise on how best to proceed. HMRC are trying to be flexible at this time – but the most appropriate course of action will always depend on your circumstances.

How Can Zest Help?

If your business is planning using Coronavirus Support measures as well as conducting work that is considered R&D, you should contact us. Decisions you make now could have a significant impact on how much tax relief you are eligible to claim in the future. We offer a free consultation – use the form on this page to get in touch.

Coronavirus Support Measures and R&D Tax Credits

Without further ado - it's time to find out how each support measure impacts any R&D Tax Credit claim. I've detailed where each measure applies, whether it is a notifiable state and any other impact you should be aware of.

I have tried to be concise – so there is no summary of how each scheme works. If you want more detail on each scheme, you can use either the UK governments Business Coronavirus Support Finder or the Business Wales Coronavirus Advice page.

Economic Resilience Fund

• Where does it apply: Wales Only
• Is it notifiable state aid: Yes

As the Economic Resilience Fund qualifies as Notifiable State Aid - it may lead to restrictions on your R&D Tax Credit Claim. This will depend on how much funding you receive, and whether it will be used to fund your R&D projects directly. Refer to the Notifiable State Aid section above for more detail. If you’re unsure – get in touch for a free consultation.  

Lockdown Business Fund

• Where does it apply: Wales Only
• Is it notifiable state aid: Yes

As the Lockdown Business Fund qualifies as Notifiable State Aid - it may lead to restrictions on your R&D Tax Credit Claim. This will depend on how much funding you receive, and whether it will be used to fund your R&D projects directly. Refer to the Notifiable State Aid section above for more detail. If you’re unsure – get in touch for a free consultation.  

Small Business Rates Relief Grants

• Where does it apply: Wales Only
• Is it notifiable state aid: Yes

As the Small Business Rate Relief Grant qualifies as Notifiable State Aid - it may lead to restrictions on your R&D Tax Credit Claim. This will depend on how much funding you receive, and whether it will be used to fund your R&D projects directly. Refer to the Notifiable State Aid section above for more detail. If you’re unsure – get in touch for a free consultation.  

Coronavirus Bounce Back Loan

• Where does it apply: United Kingdom
• Is it notifiable state aid: Yes

As the Coronavirus Bounce Back Loan qualifies as Notifiable State Aid - it may lead to restrictions on your R&D Tax Credit Claim. This will depend on how much funding you receive, and whether it will be used to fund your R&D projects directly. Refer to the Notifiable State Aid section above for more detail. If you’re unsure – get in touch for a free consultation.  

Coronavirus Business Interruption Loans (CBIL)

• Where does it apply: United Kingdom
• Is it notifiable state aid: Yes

As the Coronavirus Business Interruption Loan (CBIL) qualifies as Notifiable State Aid - it may lead to restrictions on your R&D Tax Credit Claim. This will depend on how much funding you receive, and whether it will be used to fund your R&D projects directly. Refer to the Notifiable State Aid section above for more detail. If you’re unsure – get in touch for a free consultation.  

Coronavirus Job Retention Scheme (Furlough Scheme)

• Where does it apply: United Kingdom
• Is it notifiable state aid: No

Using the Coronavirus Job Retention scheme will not have any impact on whether your R&D projects are eligible to receive tax relief. However, you should be aware that costs related to staff who were furloughed aren't eligible under an R&D Tax Credit claim. For more details refer to the Furloughed staff section above.

Time to Pay and VAT Deferral

• Where does it apply: United Kingdom
• Is it notifiable state aid: No

Your R&D Tax Credit payments could be offset against any arrears with HMRC. This is likely to be the case if you have a 'Time to Pay' arrangement. In the case of a deferred VAT payment - because the due date has formally been moved back, you may not be in arrears, meaning your R&D Tax Credit shouldn't be offset against the deferred VAT bill.