Furlough Payments and R&D tax-credit claims

Many businesses that were affected by COVID-19 had to put staff members on a period of retained leave: i.e. furlough. If your R&D claim(s) pertain to the period where eligible staff members were furloughed and you had to make a claim through the Coronavirus Job Retention Scheme (CJRS), it can affect your R&D tax credit claim.

CJRS is viewed as a form of subsidy which disqualifies it from an R&D claim. Moreover, staff costs which were incurred while employees were furloughed cannot be included in your claim because those employees wouldn’t have been working.

R&D tax credits and flexibly-furloughed staff

As of July 2020, it became possible for staff to be on part-time furlough, working temporarily for their employer. It remained the case, however, that employees returning to work part-time could not carry out any work pertaining to their employment during a CJRS period. Any costs relating to staff during CJRS time should therefore be excluded from your claim.

What other qualifying costs could be affected by COVID—19 funding?

The Coronavirus Business Interruption Loan Scheme (CBILS) was designed to provide financial support to smaller businesses across the UK during the COVID-19 pandemic. CBILs and bounce-back loans are a form of Notified State Aid so where there is a direct link between the CBIL or bounce-back loan and your R&D expenditure it could be considered subsidised (disqualifying it from R&D tax credits). However, in most cases, CBILs/Bounce-back Loans are for more general support and the day-to-day running of the business and in said cases wouldn’t normally be considered subsidising.