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Many SMEs are currently claiming a loan under the Coronavirus Business Interruption Loan Scheme (CBILS) or Bounce Back Loans Scheme (BBLS), but they may be unaware of the effect this may have on them claiming R&D tax credits.

This is because both R&D tax relief and the CBILS and BBLS are Notified State Aid and the State Aid rules prevent more than one form of Notified State Aid from being used on the same project.

It means that:

  • If you are claiming SME R&D tax credits for a project, you won’t be allowed to use CBILS/BBLS finance to that project.
  • If you haven’t been claiming SME R&D tax credits yet, and use CBILS/BBLS to support a project, you won’t be able to use SME R&D tax credits to support that same project, either now or at any point in the future on that project.

Instead SMEs will have to claim through the RDEC which gives less return than the SME scheme – about 13p per £1 (before tax) rather than the 25-33p per £1.

SME should plan carefully when allocating any form of State Aid to R&D projects. If possible, any funding should be used on non-R&D activities, to ensure the R&D project is eligible to claim SME R&D tax credits.
If this isn’t possible and State Aid has to be used on an R&D project then it should be used on as few projects as possible.

For example, if you have three R&D projects, any CBILS or BBLS or other State Aid should not be spread out across all of them and ideally only be allocated to one project. This will allow the others to be eligible to claim SME R&D tax credits.

If you would like help with your R&D tax claim, please contact Ann Bibby on abibby@ellacotts.co.uk or 01295 250401.

On Wednesday 24 June, we are running a webinar on R&D tax credits where the issues above will be discussed. Find out more and book your place.