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How CBILS could affect your R&D Tax Claim

Updated: Aug 26, 2022

The Coronavirus Business Interruption Loan Scheme (CBILS) was set up to provide financial support to smaller businesses across the UK that were losing revenue, and seeing their cash flow affected during the Covid-19 pandemic.

Under the initiative, UK businesses making less than £45million in annual turnover were eligible to apply for a loan of up to £5 million, if they could prove their revenue stream had been severely impacted by the lockdowns and tier systems.

How does a CBILS application affect your R&D Tax Credits?

As long as the loan you receive under CBILS is not used for research and development (R&D) purposes, you can still claim for R&D Tax Credits under the SME Scheme, which allows you to claim up to 33% of your eligible R&D costs.

In the event the loan you received from CBILS has been used to fund R&D projects, this will be categorised as notified state aid, which may result in a claim under the less generous RDEC Scheme. While you are still eligible to make a claim, which is brilliant news, it is not as lucrative as the SME scheme and the tax benefit you are entitled too is a flat rate of 13% of the eligible expenditure. The benefit is also subject to corporation tax further reducing the net claim value.

You can find out more about the different schemes in our comprehensive R&D Tax Credit Guide.

If you’re looking to make an R&D Tax Claim under the SME scheme, you’ll need to demonstrate that you have kept the capital invested into R&D Tax Credits separate from the CBILS loan. Below are a few steps you can take to ensure this is carried out correctly:

  1. Firstly, you need to read the small print on any loan you apply for to check there are no clauses which require you to use the funds for anything related to your R&D expenditure. That could include things like paying the salaries of those involved in a project you’ll want to make a claim for. When you apply, you should clearly set out what the funds will be used for, making it clear that the money is for ongoing business support rather than your R&D work.

  2. Secondly, you should also try and ring fence the loan in your company accounts, to avoid any mix-up with your expenditure on Research & Development.

  3. You need to ensure there is a clear audit trail for where the CBILS money was spent, to prove it didn’t go on R&D when the time comes to claim your tax credits.

Encouraging innovation

The CBILS scheme was designed to support your business during what has been and continues to be a difficult time for many. Many businesses have seen their incomes fall dramatically resulting in one of the worst recessions in recent history, albeit hopefully short lived. The R&D Tax Credits are there to help fuel innovation, which is why it’s so important they’re still available even if you did accept a loan under CBILS.

R&D Tax Credits are urgently needed to fund new projects, the kind of projects which will get the economy back on its feet and strengthen your business, so if you’ve spent money on R&D in the past two years, you may well be able to claim back a significant amount of your investment.

If you’re looking to use a reputable R&D Tax Specialist, our Fixed Fee service will ensure that you are working with experienced professionals who will maximise your claim in an efficient manner.

Explore some of our client’s feedback on their experience with Claim Capital, or arrange a call with our team today to see how much tax benefit you could be due from HMRC.


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