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    HMRC have recently released various forms of confirmation and guidance (both by email directly and by changing their own manual online) around how R&D incentives claims will be impacted by furlough payments, including those that have been met by the Government through the Coronavirus Job Retention Scheme (CJRS) over the last few months.

    Below, I have summarised some of the key points that claimants will need to take care with when compiling the claims in respect of the accounting periods that cover the Summer months of 2020.

    • Bounceback/CBILS/CLBILS loans, as previously stated, are all notified state aid, meaning that they could potentially prevent a Small or Medium Enterprise (SME) from making a claim under the SME regime (and instead default to the much less generous Large company scheme. However, whilst each claim scenario will be addressed on its own merits, HMRC’s expectation is that the above wholesale reduction (of the benefit of the entire claim from c25% to c10%, not just the amount covered by the loan) would only happen where the loan “relates specifically to….expenditure incurred on an R&D project, rather than providing general support for the company”.
    • CJRS is different, as it IS NOT a notified state aid and so the entire costs of the claimed project point above, wouldn’t apply. Instead, only the costs covered by the loan (treated like a subsidy of the costs for this purpose) would be subject to the reduction to the Large company scheme and the lower benefit.

    However, it seems like both of the above are likely to be moot points. Here’s why:

    • The vast majority of the above Covid support loans have been applied for as general business support loans.
    • For periods where employees were furloughed and CJRS funding was claimed to cover it, employees were not available to work and hence could not have been performing qualifying activities for R&D claims purposes in any case (there could have been elements of training and study that could be claimed for post 1 July but this is likely to be fairly minor in the grand scheme of things).

    Claimant companies will, of course, need to ensure they properly apportion time (and costs) between furlough/non-furlough periods when preparing their claims for the accounting period covering Summer 2020. For example, for an annual claim for a staff member normally 80% qualifying who was furloughed for 4 months, the amount to be included in the claim is 80% x 8/12 of remuneration.

    HMRC have additionally confirmed that periods of holiday and sick pay taken during furlough CAN be included in the staff costs calculation (subject to appropriate apportioning for CJRS) and claimed under the Large scheme.

    If you’ve got any questions about how furlough payments will affect your claims, you can get in touch with me at chrisk@cooperparry.com 


    CHRIS KNOTT, R&D Incentives Partner

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