They say that you can’t have your cake and eat it, and with BBL/CBILS and R&D that does seem to be the case.
Many businesses over the next couple of years will find that those Bounce Back Loans aren’t as string free as they were originally said to be. There is likely to be a lot of frustration in the R&D industry due to the way that the government has classified various Covid-19 help schemes, such as the Bounce Back Loans (BBL) and the Coronavirus Business Interruption Scheme (CBILS). They are classified as notified state aid, which SME R&D is also classified as – and, unhelpfully, state aid can’t be claimed twice.
Essentially, if you took a Bounce back loan or CBILS, and have used that cash to fund an R&D project, then you cannot claim for the R&D tax refund on that project through the normal SME track. From the government’s perspective, you’re Oliver Twist and no you can’t have any more.
However! There is some good news: whilst you may have had a slice of the state aid cake, there is a small opportunity for perhaps a few more mouthfuls. There are two options still available to companies who received a loan and spent money on qualifying R&D:
Firstly, you do need to assess how much of the loan was received and how it was utilised to support the company. If the money has been sitting idle in a separate savings account or you purchased a large piece of plant, then it can be argued that the state aid was not spent on the R&D project and so the SME R&D tax relief can still be claimed.
Secondly, if the loan entered your cash flow and was spent on a whole host of things, including R&D, then you won’t be able to claim via the regular SME R&D route, but you should still be able to claim through RDEC, which is more commonly accessed by large companies. It’s a much less generous tax credit, but it isn’t state aid and is an awful lot better than nothing!
Either way, your best bet is to speak to us so that we can help you work out what is best for your company. It’s not always easy to work out where the loan money has been distributed and what parts of your projects can be used to claim tax relief.
Let us help you be rewarded for making that cake in the first place.