You Can’t Have it All – R&D Tax Relief, Bounce Back Loans, and CBILS
In the last 12 months, the UK Government has provided several schemes aimed at supporting businesses through COVID-19. These include the the Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Scheme (CBILS), where the Government has agreed to back loans provided under these schemes to help businesses obtain funding and to encourage lending from loan providers.
Under the SME R&D tax relief scheme, small and medium sized companies (SMEs) that engage in qualifying research and development projects may also claim enhanced corporation tax relief in relation to certain qualifying expenditure, and where the company is loss making, part of the loss may be surrendered for a repayable tax credit from the Government under the scheme.
Notified State Aid
A notified state aid is a state aid that has been notified to, and approved by, the European Commission. It includes the SME R&D tax relief scheme, BBLS, and CBILS.
The rules for the SME R&D tax relief scheme provide that if a company receives a notified state aid in relation to an R&D project, it cannot then receive other state aids in relation to the same project. It should be noted that where notified state aid has been received for a project, it cannot be subsequently paid back in order to make a claim for R&D tax relief.
What does this mean for R&D Claims?
Where a company has received a loan through BBLS or CBILS, this may affect their ability to claim R&D tax relief on the projects it has undertaken. However the position is not clear cut, and consideration is needed around the amount of notified state aid received, and how it was utilised to support the company.
An alternative to the SME R&D scheme is the R&D expenditure credit (RDEC). The scheme is typically utilised by large companies engaging in qualifying R&D projects where they do not qualify for the SME R&D scheme due to their size.
If as a result of having utilised a BBLS a CBILS loan a project will no longer qualify for relief under the SME R&D scheme, the company may still be able to make a claim under the RCEC scheme as this scheme is not classed notified state aid.
In any case it is recommended that where a company that has received BBLS or CBILS and wishes to make a claim for R&D tax relief, that they contact an R&D specialist to review their circumstances and the relief that may be available, to ensure the most effective claim is made. If you have any questions regarding R&D, or wish to discuss a claim for your company, please get in touch.