Having staff on furlough has an impact on your R&D claim.
On 1st March, 2020, the government released the coronavirus job retention scheme, or as most of us know it, furlough. Over 1.2 million employers took advantage of this, and over 9.2 million employees have become furloughed workers this year.
The scheme stated that the government would pay for 80% of the salary, up to £2,500 per month, with the employer then having the option to top-up the remaining 20%.
So, how does this impact R&D tax claims?
As a general rule, there is no direct impact on your next R&D tax claim. The scheme does not interfere with any other government support, therefore you can file your SME relief as normal.
Having said that, there are a few things to note:
1. Furloughed Staff means less to claim.
One of the key points of the scheme is that furloughed workers may not conduct any work during the period that they are furloughed. This means that they cannot be regarded as directly or actively engaged in the relevant R&D activities, thus, you cannot claim the employee wages in your claim, even if you topped up the wages to 100%.
2. Furloughed Staff means less work gets done.
Having staff on furlough may significantly impact, or stop entirely, the R&D project. This means there may be a much smaller claim to make this time round, with less people working.
3. Holiday & sick pay is an exception
You can claim tax relief on any holiday or sick day that your staff have taken, even if they were on furlough during this period. This is because the government sees holiday and sick days as mandatory parts of an employees work, and this rule applies whether or not they are on furlough.
Please keep in mind that if you claim employees sick pay and holiday costs, this must be done under the RDEC rules, rather than SME relief. This means you will only receive around 11p on every £1 you spend on holiday/sick pay.