Budget 2021: R&D Tax Relief Consultation

Innovation is the key to building back better

Myriad Associates welcomes Chancellor Rishi Sunak’s Spring Budget as it recognises the importance of R&D in the country’s efforts to bounce back from the pandemic.

The government unveiled a number of measures to encourage business investment in innovation across the board. We’ve looked at them in more detail here.

Important! New consultation on R&D tax reliefs

The government has now confirmed its plan to launch a consultation around R&D tax reliefs.

The review will look at all elements of the two branches of the R&D Tax Credits scheme (the SME branch and RDEC). The point of the consultation is to make sure the UK remains a competitive location for world-leading research.

The government consulted last year on whether to bring data and cloud computing costs under the umbrella of eligible R&D costs. Respondents were generally in favour of the move, bringing about a strong case for a wider review of other qualifying costs. This is particularly the case in a rapidly changing R&D environment, and to continue maximising the relief available.

This next consultation will seek to again look for stakeholder responses to the nature of private-sector R&D investment in the UK. It will concern the extent to which R&D is supported by the existing R&D tax relief schemes to see if any changes are required.

Furthermore, the consultation will look at:

• Whether the eligibility and scope of the reliefs are up-to-date to reflect how modern R&D is conducted.
• How effectively the existing R&D reliefs work for both businesses and HMRC, and whether any improvements could be made.
• How the reliefs are targeted, and whether they represent the very best value pound for pound for taxpayers.

The consultation will launch in due course and we’ll keep our website updated. But in the meantime you can read up about R&D Tax Credits, the difference between SME and RDEC claims, capital allowances and more on our website.

How else the Budget recognises the importance of UK R&D

Rishi Sunak has also set aside an additional £375 million to introduce Future Fund: Breakthrough. Building on the government’s Future Fund, the extra cash will go towards supporting the scaling up of R&D-intensive businesses across the country. The British Business Bank will provide equity in funding rounds of more than £20 million led by private investors to make sure heavily innovative companies can access the capital required to grow. It’s hoped the move will generate jobs and boost prosperity within local communities throughout the UK.

Then there’s the newly devised “super-deduction” relating to the purchase of new plant and machinery assets. From the 1st April 2021 until 31 March 2023, companies investing in eligible new plant and machinery assets will receive a generous 130% first-year capital allowance. This valuable upfront deduction means that companies can slash their tax bill by as much as 25p for every £1 invested. See more.

UK Infrastructure Bank

In the course of his Budget announcement, Sunak also gave further details about the UK Infrastructure Bank - a predecessor to the European Investment Bank now we’ve left the EU.

The bank, set to launch this summer, will provide £12 billion of equity and debt capital to fund private sector and local authority infrastructure projects countrywide. It will also be able to issue a maximum of £10 billion in guarantees.

Based in Leeds, it’s hoped that the bank will support around £40 billion worth of infrastructure projects at a cost the exchequer of £745 million in 2021-22. The final cost by the end of 2026 is expected to be around £1.79 billion.

A range of additional tools are also expected to be offered by the Infrastructure Bank, including hybrid products, guarantees and loans to local authorities at a rate of gilts in addition to 60 basis points to cover strategic infrastructure projects. It’s hoped the bank will drive the “green building revolution”, playing a crucial role in the government’s goal of net-zero carbon emissions by 2050.

All investment decisions will be made entirely by the Infrastructure Bank, and the criteria it uses to make such decisions will be in line with its objectives. The bank will primarily focus on the economic infrastructure sectors covered in the National Infrastructure Strategy. These include digital infrastructure, transport, clean energy, water and waste. Furthermore, it will offer the chance for universities to receive funding for R&D projects that support local and regional growth. Companies developing early-stage technologies will benefit too, with more information about the scope of support to be made available in the coming months.

Speak to the R&D tax and funding experts at Myriad Associates

Having been in business almost two decades, our specialist team of R&D consultants are experts in all aspects of R&D funding. Whether you’re looking for an R&D grant to set your latest innovative idea in motion or you’re wondering how to apply for R&D Tax Credits, we’ve got you covered.

The R&D Tax Credits scheme is something no eligible business will want to miss out on. Offering as much as 33 pence per £1 of eligible R&D costs back, companies claim the refund either as a cash lump sum or as a reduction in Corporation Tax. A large number R&D costs can be included in a claim, such as staff and subcontractor costs, consumables, software licenses, materials and much more.

Regardless of which industry an organisation operates in, if a scientific or technological uncertainty was addressed in the course of its R&D work then R&D Tax Credits will likely follow. The important thing is that you’ve made an honest effort to innovate - it doesn’t even matter if the project was successful in its aims, or even if it was abandoned altogether.

Completing an application for R&D Tax Credits is a complex process and it’s easy to make a mistake, but our specialist advisors are here to support you. Thanks to our many years of industry experience we will take you step by step through your claim ensuring all eligible costs are included. We’ll also assist you in completing your technical report to the standard HMRC expects and answer any queries too.

Our proven success rate speaks volumes, so why not let us take the pain out of claiming.

Call us now on 0207 118 6045 or use our contact form. We're working remotely as always during the pandemic via video call, phone or email and are ready to help.

Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud