Impact of Coronavirus Business Interruption Loan Scheme (CBILS) & Bounce Back Loan Scheme on R&D claims

Shortly after the government’s 2020 Spring budget was announced, CBILS was introduced as a form of government funding to help businesses through the effects of social distancing. The scheme offers loans to SME’s where the government will pay interest payments and any-levied fees for the first 12 months.

HMRC has confirmed the scheme as a notified state aid, which means receiving funds under this scheme may also conflict with SME R&D claims if not planned carefully. However, one precludes the other on a project basis. If a project has already received one form of notified State funding, then they are unable to receive another.

This means if a project is funded with money from a CBIL, it is then exempt from an SME R&D tax credit claim, but can still be included in an RDEC claim. The rule works on a project-by-project basis, which means it’s possible for businesses to obtain a CBIL and claim SME R&D tax credits. It’s a complex path to understand, so it’s recommended to speak to an expert who deals with R&D tax credits daily about it.

On April 27, 2020, plans were unveiled by the government to launch the Bounce Back Loan scheme. This was introduced at the beginning of May, and was in place to help small and medium-sized businesses affected by corona virus. Businesses were able to apply for loans of up to £50,000 with this scheme. The loan is then guaranteed by the government and no fees or interest is paid by the business for the first 12 months.

In terms of interaction between R&D tax credits and Bounce Back Loans, Bounce Back Loans are a notified State aid, and therefore similar guidance applies as for CBILS. This, however, can classify the loans as ‘de minimis’ State aid, as the loan amounts are smaller. A company cannot claim SME R&D tax credits on R&D expenditure subsidized by de minimis State aid, but there is no impact if the de minimis aid is spend on any other project or business expenditure.