R&D tax relief and COVID-19

Date posted: 8th Jul 2020

Tax relief for research and development (R&D) expenditure, remains an underclaimed corporate tax relief. Nevertheless, for those companies claiming the relief, it has proven to be a valuable source of funding.


However, due to the additional support offered by the government during the COVID-19 pandemic, it could mean that companies claiming R&D relief are entitled to less tax relief in the future. The government’s schemes such as CBILS are classified as notified state aid (as are a number of grants available to companies). Claiming notified state aid means that the company may have to restrict the amount of R&D tax relief that can be claimed.


The relief will be restricted where the state aid has been used towards specific R&D expenditure. If the state aid has been used towards general business costs and support, then there may be no restriction to the tax relief.


However, the CBILS, will not impact upon any untapped R&D tax relief for earlier years. It is important to remember that a claim for R&D relief can be made within two years following the end of an accounting period. So for instance, it is possible to make a R&D claim for the year to 31 July 2018 as long as this is submitted by 31 July 2020. Therefore, if a company hasn’t previously made a claim for R&D tax relief, it could be a valuable opportunity to consider this sooner rather than later and reclaim some taxes from earlier years. Even if the company has made losses, there may still be an opportunity to claim a tax credit from HMRC.


If you have any queries in relation to R&D tax relief, please contact our Tax team here or call us on 01325 349700.


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