COVID-19 has wreaked disruption and uncertainty in all aspects of businesses across the globe, particularly in the financial side of things. Understandably, the crisis has raised concerns for businesses who are considering submitting an R&D claim and for the business who have already submitted one. But the truth of the matter is there has never been a better time to apply for R&D tax relief.
Why has there never been a better time to apply for R&D tax relief?
During the pandemic, it’s very likely that companies have increased their research and development activity. For example, pharmaceutical companies have been researching for a vaccine and hiring volunteers to take part in clinical trials. Lots of businesses have also been investing in developing PPE over the past few months for the safety of their own employees as well as to help the NHS and care homes. Many businesses are experiencing unexpected cash difficulties, so opportunities like claiming for R&D tax credits could be a lifeline as they can reduce corporation tax payable and can often generate a repayment.
Of course, not all businesses will have carried out R&D activities like researching for a vaccine or hiring clinical volunteers. Nonetheless, it’s still worthwhile investigating whether they could submit a claim as the scope for R&D is broad.
Why might companies be concerned about their R&D claim?
Understandably, there are a number of reasons why businesses still might be concerned about processing an R&D claim during the pandemic. Hopefully we can help to clear up any confusion.
Firstly, most businesses have faced operational difficulties over the past few months from having to furlough their workforce or deal with absences due to illness, meaning they haven’t been able to submit their claim on time. Thankfully, HMRC have advised they will consider giving an extension to claims that have been submitted late, so long as they meet the criteria that is detailed in the HMRC Statement of Practice 5/01.
The Coronavirus Business Interruption Loan Scheme
There’s also been some confusion over whether businesses can claim for R&D tax credits alongside government emergency funding such as the Coronavirus Business Interruption Loan Scheme (CBILS). The good news is yes, businesses can still claim for R&D tax credits if they are receiving government funding. However, because CBILS is a notified state aid, this could impact a business’ ability to claim as an SME the same way other grants would. If a company has used CBILS funding on eligible R&D project, they may have to claim under the less generous RDEC scheme for that project.
R&D claims are usually processed and paid out within 28 days, which is great for businesses who might be struggling financially and need the cash promptly. For businesses who have already submitted a claim, a lot have been left wondering if their process will be delayed. Although HMRC are still meeting their aim of processing claims within 28 days of submission, at the moment, some claims are taking around 6 weeks to process. At ZLX, payments are being paid to us within 60 days and we are paying those out within 4 days.
Eligibility for R&D during the pandemic
Businesses may be questioning their R&D tax credits eligibility because they are no longer a going concern – a statutory requirement when submitting a claim. However, the going concern rules are based on a business’ last set of accounts submitted to Companies House and most of these would be been submitted prior to the pandemic, meaning there should be no impact on eligibility.
We hope this information has helped clear any concerns or confusion you might have over claiming for R&D tax credits during the pandemic.
If you’re looking to make an R&D tax credit claim for your business, the team at ZLX are on hand to help. You can get in contact with us by emailing us at [email protected] or by phone on 0141 739 3377.