COVID-19: R&D relief

Last updated: 3 April 2020

HMRC have recently provided the professional bodies with an update on various issues raised by the COVID-19 crisis in relation to corporation tax R&D relief.

R&D relief claims and repayments

HMRC have confirmed that their priority is to maintain their published aim of clearing 95% of SME R&D tax credit claims within 28 days, and indicated that they are currently meeting this aim.

HMRC have said that, whilst the deadlines for making claims under the SME and Research and Development Expenditure Credit (RDEC) schemes are set by legislation, they will be sympathetic to those facing problems in meeting these. If a business is unable to meet the time limit, they should submit their claim as soon as possible and HMRC may be able to accept a late claim. HMRC will decide whether each such claim will be accepted in line with Statement of Practice 5/01.

Set off of R&D claims against other taxes

HMRC have indicated that, where a claimant has other tax liabilities owing, in the case of RDEC they have no discretion under the current legislation, and will therefore continue to operate on the basis of the existing set off provisions. 

HMRC are still considering the position for claims in respect of the payable SME credit.

The “going concern” requirement in the SME scheme

Under the SME scheme, a claim for either an enhanced deduction or repayable credit can only be made if the claimant was a going concern based on their latest published accounts.

HMRC have confirmed that this going concern condition is a statutory requirement, and therefore cannot be overlooked.  However, they note that the requirement involves looking at the latest published accounts which will, in many cases, have been prepared before the effects of the COVID-19 crisis began to be felt.

HMRC will continue to monitor the impact of COVID-19 on companies’ ability to meet this and other requirements.

State Aid and Government support schemes

If COVID-19 Government support schemes are classed as State Aid they may affect a company’s ability to claim under the SME R&D scheme (which is itself a form of State Aid).

The Government has notified the Coronavirus Business Interruption Loan Scheme (CBILS) as a State Aid under the European Commission’s new Temporary Framework for COVID-19. The measure is a fully notified aid, meaning that, per s1138(1)(a) CTA 2009, relief cannot be claimed under the SME scheme if the CBILS relates specifically to the company’s R&D expenditure on a project, rather than being intended more generally to support the company.  Whether this is the case will depend on the particular facts of each claimant.

HMRC have said that they will be monitoring the application of this rule and welcome feedback.