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HMRC updates on R&D tax relief in the light of Covid-19

GovGrant, like many SMEs, is doing everything we can to share, support and advise UK companies at this time

Yesterday we received an email update from HMRC specifically on R&D tax relief, which we share below. We hope it helps answer some of your questions but if you want to have a more detailed conversation about how Covid-19 is affecting your business either email or leave a message and we’ll get back to you.

For more information on Covid-19 you can refer to our dedicated webpage, which we will continue to update in these fast-moving times.

HMRC communication 2/4/2020

HMRC is receiving a high volume of questions at the moment and issued an update which GovGrant received as a member of the Research and Development Consultative Committee.

The communication focused on 5 key areas:

When can I expect my R&D tax credit to be processed by HMRC?

Many questions to HMRC have been focused on processing times and if payments can be accelerated. They confirmed:

  • Priority is to maintain their published aim of clearing 95% of SME tax credit claims within 28 days and currently, they are meeting this aim.
  • Implemented contingency plans to support processing times, including applying extra resource to the work.
  • Flexibility regarding deadlines is challenging as this is a legislative dictate so companies should presume they need to follow normal deadlines. The deadline to claim is 2 years from the year end of a business to make an R&D claim.
  • For SME R&D tax credits, HMRC is considering whether this will be offset against liabilities or paid out in full. We have seen cases where they have been paid out in full, but this cannot be relied upon as the norm.
  • Research and Development Expenditure Credits (RDEC), HMRC has no discretion under the current legislation to not offset against other liabilities. For example, if there is an unpaid PAYE liability due to HMRC and you are also due an RDEC credit, the credit will be paid out minus the PAYE liability

Can the “Going concern” requirement in the SME R&D tax scheme be set aside?

The going concern condition is a statutory requirement so it is one that HMRC cannot overlook. The condition requires the claimant company to have been a going concern according to the last published accounts. In many cases these will have been prepared before the effects of COVID-19 so there should not be any issue caused by the going concern requirement.

HMRC will be monitoring the impact of COVID-19 on customers’ ability to meet this and other requirements and they are open to be approached if it is causing genuine operational difficulty.

Are new Government support schemes introduced in response to the Coronavirus, such as CBILs, State aids or subsidies? Will they affect a company’s ability to make a claim under the SME R&D tax scheme?

The Government has notified CBILS as a State aid under the European Commission’s new Temporary Framework for COVID-19. The measure is a fully notified aid, so the restriction on receipt of other State aid (s1138(1)(a) CTA 2009) potentially applies, 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. This will depend on the facts.

HMRC will be monitoring the application of this rule and welcome feedback.

Budget 2020 announcements

Following the 2020 Budget earlier this month, the following measures were announced which relate to R&D reliefs.


Following consultation last year, the introduction of the PAYE cap on the payable tax credit in the SME R&D schemes will be delayed until 1 April 2021. This allows time for further consultation on the design of the cap. A consultation document has been published and is available here.

The summary of responses to the consultation held last year is available here.

Expanding Scope of Qualifying Costs

The government will also consult on whether expenditure on data and cloud computing should qualify for R&D tax credits. The consultation will be published in due course.

All announcements from Budget 2020, including the above can be found here.

Off payroll

You may be aware the Government announced on 17 March 2020 that it was delaying the introduction of the off-payroll working reform from April 2020 to April 2021. As a result, the consequential amendments in relation to R&D legislation will not be made until April 2021. More details can be found here.

COVID 19 support for business

For more information regarding the wider measures set out by the Chancellor to help businesses through this period of disruption caused by COVID-19 please see here.

GovGrant CEO Luke Hamm commented that

HMRC are faced with unprecedented demand and are a critical function in helping government deploy the support given to respond to Covid-19. Whilst delays and uncertainty can be frustrating to all companies, we very much welcome the HMRC R&D teams open and informative response that has provided clarity. Equally, we thank all of HMRC for their work at this difficult time to make sure companies benefit for all the measures taken.

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