SUPPORT MEASURES PUTTING SME R&D TAX RELIEF AT RISK
Certain measures designed to offer a lifeline to Small and Medium-sized entities (SME)’s, have now been classed as Notifiable State Aid (NSA) under the European Commission’s new Temporary Framework for COVID-19.
- Coronavirus Business Interruption Loan Scheme (CBILS)
- Bounce Back Loan Scheme (BBLS)
- Retail, Hospitality & Leisure Grant Fund (RHLGF)
If a company receives support from any of these schemes, then it will not be possible to claim SME R&D Tax Relief for that project as a company can only be in receipt of one form of NSA on any one R&D project.
The rules are applied on a project-by-project basis, and it can become complex. With appropriate loan application wording and suitable record keeping, it may still be possible to obtain financial assistance for your company without impacting on your R&D claims. Contact us for further advice.
The Government has now classed the Small Business Grant Fund (SBGF) as De-minimis State Aid. Where a loan or grant is labelled “de-minimis”, then only the subsidised amount which is used for the R&D project will not be claimable under the SME scheme.
HMRC’s view is that once support has been obtained, it cannot subsequently be repaid or reversed in order to benefit from R&D under the SME scheme. In other words, once it is processed and completed, the restrictions to the SME scheme apply.
Where an R&D claim has been jeopardised under the SME scheme, projects in receipt of notifiable and de-minimis state aid may, however, still qualify for Research and Development Expenditure Credit (RDEC) scheme, although the benefit under RDEC is significantly less.
Innovate UK Funding
Similar rules apply for Innovate UK funding. Innovate UK funding is given to companies which carry out R&D, and therefore the interaction with R&D tax credit claims can be complex. Up to £750m in grants and loans will be offered to SMEs carrying out R&D. Generally, Innovate UK funding is a Notifiable State aid. This means that receiving an Innovate UK grant for an R&D project means it is likely that project cannot be included in your SME R&D tax credit claim. However, you will be eligible to claim under RDEC on this project.