Date09 Apr 2021
CategoryTax, R&D Tax Incentives
The Chancellor’s Budget of March 2021 came at a time when businesses were considering their plans for the year ahead, especially as the economy begins to unlock in the Spring and Summer months. After a year in which many companies have prioritised mitigating the damage and uncertainties of the COVID crisis, the new financial year offers an opportunity for a fresh start and to think about investment for the future.
The Government confirmed in the Budget that it continues to place Research & Development (R&D) at the heart of its plans to boost the economy, with an ongoing target to raise total investment in R&D to 2.4% of UK GDP by 2027. As well as the provision of grants and subsidies, generous tax reliefs remain in place to support innovative businesses making investments in cutting-edge products and processes.
HMRC’s Research & Development Tax Credit Scheme enables SMEs to access tax relief and cash credits to further invest in their research, or indeed help fund working capital. To qualify for R&D Tax Relief a project must seek to make an appreciable improvement in its field in order to resolve a ‘scientific or technological uncertainty’. The tax relief can be worth up to 33% of the amounts invested in R&D.
Companies operating in sectors including agriculture, architecture, construction and engineering, manufacturing, food and beverages, IT development, telecoms and energy supply may qualify for this tax relief.
The Budget also confirmed a series of new measures around Corporation Tax. As well as introducing a Super-Deduction for businesses that invest heavily in capital projects, HMRC has extended the period that a company’s trading losses may be offset against its previous years’ profits. This has the potential to provide a significant cash boost to many companies who have made losses during the COVID period, or who continue to do so into 2021/22. For companies making R&D Tax Relief claims this change in the “carry back” rules could have a substantial advantageous impact on the, already generous, amounts re-claimable in corporation tax rebates.
Tim Croft, Head of R&D for Azets said:
“The R&D Tax Credit Scheme continues to be one of the most attractive tax breaks offered by HMRC to both profitable and loss-making companies. The new Corporation Tax rules introduced in Rishi Sunak’s Budget further enhance the value of the Tax Relief open to innovative businesses who qualify. I would urge any companies, developing new concepts and processes, or seeking to improve upon existing technologies, to come and speak to us.”
We are here to help
At Azets we know your business and will help you identify qualifying R&D projects and how you can benefit from tax savings. We have extensive expertise in R&D Tax Credits throughout the firm, having been involved since the tax relief was first introduced by HMRC at the beginning of the century. We are part of the HMRC R&D Consultative Committee and regular commentators in the R&D Community.
For assistance, please get in touch with your usual Azets contact or speak to one of our R&D tax specialists.