Accounting Firms

CBILS puts SME R&D tax credits at risk, warns Kreston Reeves

The Government’s Coronavirus Business Interruption Loan Scheme (CBILS) will put valuable R&D tax credits for small and medium businesses (SMEs) at risk, warns accountants and business advisers Kreston Reeves.

The firm said CBILS are considered “fully notified state aid” with rules stating that companies can only be in receipt of one form of state aid. The problems occur because SME R&D tax credits are also considered a form of state aid.

Ross Parsler, corporate tax senior manager at Kreston Reeves said: “Where a company receives a grant or subsidy that is classed as state aid it results in the total exclusion of all other state aid on any one project. Both SME R&D tax credits and CBILS are considered state aid.”

SME R&D tax credits are available to companies with fewer than 500 employees and either turnover of up to or balance sheet assets of up to €86m (£75m) undertaking qualifying R&D activities. SMEs can receive corporate tax savings or refunds of between 33% and 43.7% of R&D projects. 

Should SME R&D credits be precluded, SMEs could still claim under the large companies scheme and claim R&D expenditure credits, effectively a tax credit, of up to 10.53% on R&D projects, although the range of qualifying costs is more limited.

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Ross added: “This means companies facing the need for short term cash offered via CBILS may find themselves excluded from the potentially more lucrative and long-lasting R&D tax credit regime. And if a company has claimed SME R&D tax credits, it may find CBILS are not available to them. This is a problem created by the speed of the Government’s response.”

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