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Budget Announcement March 2021- Good News for R&D Relief

Author: Gareth Smyth

Following the Chancellor’s budget announcement this week, there is fantastic news for any UK business preparing a R&D claim.

What’s changing?

  • Mr Sunak announced that businesses making claims for accounting periods ending between 1 April 2020 and 31 March 2022, can now carry back their trading loses up to 3 years, a sizeable increase from the current 1 year. This means you can increase the size of your R&D claim by a substantial margin. If you have experienced reduced demand for your products and services or disruption to your supply chains due to the coronavirus, this extension will help cover the increase in your trading losses, providing a cashflow benefit to your company. This is fantastic news if you are a loss making company looking to make an R&D claim as you can increase the size of the cash award you receive.
  • Additionally, if you wish to continue investing in R&D in the next two years, the Chancellor stated that you can reduce your tax bill with a super deduction of 130% via capital allowances. Again, this is brilliant news as the cost of new machinery to fund your innovations will be drastically lower.
  • Mr Sunak also announced that corporation tax will rise from 19% to 25% starting in 2023 for those firms with profits over 250k, and a taper for those between 50k and 250k. Whilst most business owners are dismayed hearing the news they will lose more of their profits to tax, the increase could be good news for our clients looking to make an R&D claim as the margin of tax we can save you will be significantly higher.

More money for R&D:

  • Finally, Mr Sunak stated the government’s ambitious target to raise total investment in research and development to 4% of UK GDP by 2027. R&D tax reliefs provided £5.1 billion of support to nearly 60,000 businesses in 2017-18 and Mr Sunak alluded to increasing that figure by £1.6 billion. The Chancellor did not specify how and where this money will be invested due to a new consultation period that will last 3 months until June 2nd 2021 that will see stakeholders support a review of the different forms of R&D tax relief. This consultation will “explore the nature of private-sector R&D investment in the UK, how that is supported or otherwise influenced by the R&D relief schemes, and where changes may be appropriate.” As leaders in the field of R&D tax credits, randd uk intend to take full advantage of this consultation period and will be liaising with our political allies to bring further benefits to our clients.

In summary, the budget announcement spells good news for the ongoing security of R&D.

Our Financial Director, Matt Timby said the budget announcement was “brilliant news for any UK company which has used R&D tax credits to support their innovation, or used it to help counteract the impact of the coronavirus, as they will be generously supported by HMRC for years to come.”