VQOTW: Temporary amendment to Option to Tax notification procedure

My client is a company that has been claiming the R&D relief for SME’s for a number of years. In the APE 31st September 2020, they expect to have enough qualifying expenditure to make another claim for the enhanced deduction of 130%, as well as a potential tax credit claim.

However, they were also affected by the Coronavirus lockdown and claimed under the Coronavirus Job Retention Scheme (CJRS) for a number of staff who were furloughed. Will this affect their ability to claim under the SME scheme? 

A company in receipt of a notifiable State aid for an R&D project cannot claim any other State aids such as the enhanced R&D relief for SMES. They would instead have to claim under the Research Development Expenditure Credit (RDEC), which is not as favourable. This position is explained at CIRD81670.

However, HMRC has confirmed that the CJRS grant is not state aid because it is available to all businesses. Therefore, it should not affect a company’s ability to claim R&D tax relief.

This is confirmed at paragraph 11 of the BEIS guidelines (State aid: Guidance on the Covid-19 Temporary Framework for UK Public Authorities), which states:

  1. The UK Government has prepared a package of both aided measures such as the Coronavirus Business Interruption Loan Scheme (CBILS)10 to support SMEs, and general measures like the job retention scheme that do not constitute State aid as they are measures available to all businesses:..

The normal rules regarding subsidised expenditure still apply, as outlined at CIRD81650.  Thus, staffing costs, while normally being considered qualifying expenditure for R&D, cannot be claimed to the extent that they were subsidised by the CJRS.

Furthermore, the rules for receipt of de minimis state aid, such as the NIC employment allowance, is also outlined at CIRD81670. The NIC element of staffing costs covered by the employment allowance will also be disqualified from being claimed as part of the R&D enhanced credit.

This commentary is subject to change at short notice as the government releases its own updates – this commentary is based on guidance at 18th June 2020.


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Amaira has been working in boutique tax planning and advisory firms since 2010, gaining experience in a variety of tax sectors relating to owner managed business and individuals. Recently dealing with developments around the Disguised Remuneration legislation, she also has experience of dealing with HMRC enquiries and settlements.

Amaira has a legal background, having completed the Bar Vocational Course, and is studying toward her Association of Taxation Technicians qualifications.

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