Beyond the balance sheet

A boost for UK R&D tax as government pledges more investment

Christina Nawrocki 09/12/2020 3 minute read

Christina Nawrocki FCCA, on government boosting R&D investment and why you should review this expenditure to make a tax claim.

Research and Development (R&D) has been an area of prominent focus this year. The Chancellor announced during the 2020 Budget an increase to the R&D Expenditure Credit and postponement of the R&D cap limit.

It was reported that in 2018 R&D expenditure was equivalent to 1.7% GDP, and although investment has risen over the years, GDP has in fact decreased.

The government is taking action with a target of 2.4% of GDP for R&D investment by 2027, alongside their recently announced pledge to increase public investment in Research and Development to £22bn a year by 2025.

This means it would be a good idea for small businesses to consider R&D tax and their eligibility. We recommend doing so sooner rather than later.

Explore the potential for savings through an R&D tax claim >

A review of government spending on R&D

The government are demonstrating a significant commitment to innovation and technology given the need to trade and grow out of the pandemic. For this reason and given their new spending commitment, it's essential that you consider your organisation's eligibility for R&D tax relief.

The good news is investment in R&D is seen by the government as a key driver of innovation and productivity growth. This comes off the back of news that UK business expenditure on R&D grew at it slowest rate in 2019. This suggests that perhaps there are investments being missed by businesses and quite likely by many SMEs.

Currently, 4.1% of government spending is concentrated in London, Oxford, and Cambridge. The government is set to publish an R&D Place Strategy that will detail how they intend to drive place-based outcomes that help level up the UK. How R&D spend is allocated per region could therefore be open to change.

Where to go from here...

Undertaking an R&D tax claim is notorious for being a complicated process, and this often deters many owner managers from submitting an application or even trying to understand if they're eligible.

As with most things in business, timing is everything! R&D tax credits are no exception, we actually suggest you look into this now by working with your accountant to understand if you're eligible to make a claim. Doing so with an accountant is particularly beneficial because:

  • They have an in-depth knowledge of your business and its history
  • They will conduct a thorough review of your accounts and expenditure when preparing your claim
  • Firms such as Wellers have specialist R&D teams that stay up-to-date with all current legislation 
  • Any claim can be done in conjunction with calculating your corporation tax liability
  • It makes sense to have your financial reporting and tax claims done under one roof, by one advisor
  • Their knowledge of your business as well as R&D tax legislation means they can liaise with HMRC on your behalf when processing a claim

Wellers R&D Client Spotlight: High Spec Composites Ltd.

R&D Tax Relief High Spec Composites Ltd

There are many business owners that are unaware that they qualify for R&D, or they are discouraged from submitting a claim because of the complicated process. As experienced professionals, Wellers can work with you to help you understand your expenditure and identify relevant work undertaken to evaluate your eligibility and potential for saving money. Minimise the impact of the R&D tax cap. Start planning today! >

The content of this post was created on 9/12/2020.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.



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