Research and Development

Coronavirus: how will claims for R & D incentives be affected?

With all the measures announced by the Government in support of employers and employees over the past weeks, what impact do these have on those companies dependent on Research and Development tax credits to help fund the work they are undertaking? 

The Government is keen to continue to support innovative companies with the generous tax incentives available for the R&D work they undertake, be that 33.35% repayments to SMEs with no taxable profits, or the 43.7% tax break provided to profitable SMEs against their corporation tax bill.

We outline below some issues arising from the COVID-19 measures introduced by the Government on R&D tax incentives.

Furloughing staff

This is a generous initiative (read more here) to prevent mass redundancies of staff whilst they cannot work.  Any staff engaged on R&D activities will be automatically prevented from undertaking any R&D work whilst they are laid off on furlough.  It will therefore be necessary for companies who undertake qualifying R&D activities to ensure that those staff who are not furloughed maintain contemporaneous and accurate records of the work that they do and those who are on furlough are not included in the workings in respect of any period when they are not available.

Going concern

A fundamental condition in applying for R&D tax credit is that the company applying is a going concern.  There will be cases where there is uncertainty around this and directors will be required to assess the financial position of their company whilst the accounts are being prepared.  Doubt as to the continuing viability of the company will potentially put a future application for R&D tax credit at risk.

If you have any queries concerning R&D or any other aspect of the measures introduced by the Government, please get in touch with your RG contact who can assist in this difficult and uncertain period.

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