HMRC’s policy team have issued some good news to businesses with the confirmation that R&D tax credit repayment claims will not be subject to offset against tax deferred under a coronavirus scheme. This means that if your business has, for example, deferred its VAT liability these R&D repayable claims will still be repaid to the company.
Both the SME repayable credit and the RDEC payable amount are subject to legislation that enables HMRC to offset the repayable against any amounts of tax owing before repaying the remaining balances due. This led to concerns that an unintended consequence of the recent measures would be to reduce the benefit of these R&D tax reliefs.
In response to these concerns, the tax team at NR Barton contacted HMRC’s policy unit, which has advised that there is a distinction between ‘tax owed’ (for example under the terms of a Time-to-Pay agreement) and ‘tax deferred’ (for example VAT deferred under the deferral scheme).
Where a ‘deferral’ is agreed with HMRC, the relevant tax(es) are no longer ‘owing’ for the purpose of the R&D offset legislation. As a consequence, HMRC says its processing teams have been advised that no set-off of amounts owed against R&D amounts repayable is either required or appropriate. Therefore, VAT deferred under HMRC’s coronavirus scheme will not be offset against these R&D tax reclaims, meaning that repayable amounts will still be issued to companies with deferred VAT liabilities. Businesses that have contacted HMRC’s dedicated coronavirus team to agree a deferral of tax (CT, PAYE or otherwise) due will also benefit from these R&D claims.
HMRC also noted that Time-To-Pay (TTP) agreements for VAT and other taxes are treated differently, and are ‘tax owed’ – so an offset will be applied against these amounts. If a company had a TTP agreement in place and subsequently submitted a claim for an R&D repayable amount, that amount would most likely be offset against the amounts owing. Businesses with such arrangements in place should review their position.