Coronavirus - how will this affect R&D claims?

David Ward

David Ward

Tax Partner

In this unusual time, our advisers have received a number of questions about the impact of the current coronavirus pandemic on R&D claims. 

It’s a fast changing situation and we expect further information to come, but Partner and Head of Innovation Taxes, David Ward, sets out some of the most common questions that he's been asked, with the most up to date position.

Are we seeing delays in HMRC’s R&D claim processing?

With companies focussing on short-term cash flow, a huge number are bringing forward their R&D claim submissions. At a time of unprecedented pressure on HMRC’s operational resource, there has been understandable concern of delays. HMRC have confirmed that they are prioritising SME tax credit claims and are implementing contingency plans, including additional resource, to clear 95% of claims within 28 days. Currently they are meeting this timeframe.

Will the Coronavirus Business Interruption Loan Scheme (CBILS) prevent SME R&D claims?

The CBILS has been notified as a State aid under the European Commission’s new Temporary Framework for Covid-19. As this is a notified State aid, companies who would otherwise make SME rate R&D claims could potentially be forced to claim instead under the less generous RDEC regime. The key will be whether the CBILS relates specifically to the company’s R&D project or R&D expenditure, or whether it will be intended more generally to support the company. This will depend on the facts and companies should take account of this when drafting CBILS applications.

Will R&D claims be paid in full where businesses have other liabilities owing to HMRC?

For RDEC claims, HMRC have no discretion under the legislation, the offset is required. However, for SME payable credit claims, HMRC are actively considering this and the hope is that they will prioritise payment of R&D credits over collection of other liabilities in the current environment.

Will the going concern requirement be relaxed during the current pandemic?

This is a legislative condition, so HMRC cannot ignore it. However, HMRC’s latest correspondence on this indicates that they will look to the last published accounts. In many cases, these will have been prepared before the effects of Covid-19 and there will have been no impact on the going concern requirement. The suggestion here is that such companies would be able to submit claims now even if they would have some doubts about their current going concern status in light of the uncertainty that results from the current pandemic. For companies finalising accounts in the current environment, the position is less clear. HMRC are monitoring the impact of the pandemic on companies’ ability to meet the going concern requirement and more may come out on this soon.