During these unprecedented times, many businesses are struggling to survive and are looking at ways to support themselves through this period. The government has announced various packages of support to help businesses and keep them afloat. But what impacts might these packages have in the longer term?
Like many things that are government-funded, there will be impacts on combining different types of funding especially those deemed as State Aid. The SME Research & Development (R&D) tax credit scheme is classed as State Aid so seeking assistance or claiming R&D tax credits in the future may be impacted.
What will be classified as State Aid?
We already know that the Coronavirus Business Interruption Loan Scheme (CBILS) is being classed as State Aid. This scheme offers business loans to SMEs who are unable to access bank loans and the government will cover the first 12 months interest payments.
If you have claimed R&D tax credits in the past you may not be entitled to CBILS if you have received more than €200,000 over the last three years. This is due to a de minimis being placed on aid which has been set at €200,000 over three years, so if you exceed this on any State Aid it won’t be allowed or capped.
If you plan to claim R&D tax credits under the SME scheme for the current year, then your activity may be deemed ineligible due to you receiving CBILS. It is possible you could claim under the less beneficial Research & Development Expenditure Credit (REDC) scheme as this isn’t classified as State Aid.
The other support available includes small business grants up to £10,000, grant funding for up to £25,00 for hospitality, retail and leisure, and rates relief. These forms of support may fall under the de minimis rules if classified as State Aid. However, if the Coronavirus Job Retention Scheme is classified as State Aid then this too may have a significant impact on future claims.
What can you do?
The decision to take aid due to the Coronavirus is driven by the need to survive and if your business can’t survive then you may not be able to make an SME R&D tax credit claim in the future. Therefore, the survival of your business must come first, but it might be worth weighing up all options available to you to get the best support for the longer term.
If you are doing R&D and thinking of claiming for it, you will need to carefully document your activities on each project that is doing R&D eligible activity. If you stop activity over the period it could alter this, and any activity not started shouldn’t be affected, which is why you should document everything to support any future R&D tax credit claims.
All of these impacts have been unintended and have come about with the speed in which the government have had to react to keep the economy afloat and to retain jobs. We anticipate that further guidance and support for businesses on these matters should be published.
We are here to help
If you would like to seek advice on R&D tax credits, we are here to help with free and impartial advice. To find out more contact TEQ Group today on 01423 815299 or click the button below and we’ll be happy to offer some advice.
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