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How can R&D support companies through the coronavirus

Emma Reynolds, Senior Manager, Corporate Tax
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Whilst over the last few months the Chancellor announced a series of measures to attempt to support businesses through the coronavirus (COVID-19) situation – including reducing certain costs, allowing greater time to pay arrangements with HMRC and making bridging finance available. 

But does R&D also have a role to play?

Where a company has spent money on qualifying R&D, and the R&D claim will create a tax repayment, it is worthwhile getting the R&D claims submitted early.

It would be great if HMRC would pay these claims out promptly to further support companies as they weather the coronavirus storm. HMRC has a standard turnaround time of 28 days for making R&D repayments. It would be a real encouragement to companies if at this time they could make repayments earlier.

Companies can shorten their accounting periods at will, which does create additional administrative burdens, but for companies incurring substantial R&D costs this can be a great way to accelerate a tax repayment. For companies that are keen to boost their cash buffer for additional comfort through the coronavirus situation, this may be an action worth considering.

Some things to consider to ensure a valid claim is submitted:

  • This must be made via the tax return, which also requires the statutory accounts to be signed and ‘tagged’
  • HMRC require supporting narrative to accompany the claim, whether by a separate report submitted electronically with the tax documents or via their online R&D portal
  • The claimant company must be a ‘going concern’ at the time the claim is made. A company is a going concern if its latest published accounts were prepared on a going concern basis, and nothing in the accounts suggests that that status depends on its receiving R&D relief or tax credits. A company in either administration or liquidation cannot make a claim to relief.

Please speak to a specialist within our innovation taxes team if you would like support in accessing these valuable tax reliefs and unlocking potential cash for your business.

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Stuart Weekes
Stuart Weekes
Partner, Corporate Tax
Thames Valley