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Research & Development Tax Relief – the time to act

The Research & Development (R&D) Tax Relief scheme has been in place for almost 20 years, yet it’s more popular than ever with growing numbers of businesses – well above the 20% annual growth in UK companies – claiming it each year.

Who is eligible to claim under the scheme?

Businesses of all sizes can benefit from making claims under the scheme by way of a reduction in the Corporation Tax liability or via a payable credit, provided money is being spent on ‘innovative projects in science and in technology’. That same headline definition is one of the deterrents for many SME businesses (and their advisors), who incorrectly assume projects in sectors outside of science and technology will not qualify for the scheme.

As a first step, businesses should carefully consider their intellectual property and whether they have created anything that is unique, before consulting their professional advisors.

For businesses in the science and technology sector there is clearly a high chance that projects undertaken will be eligible for the scheme, subject to receipt of other state aid. For those new to the sector, in their pre-revenue development cycle, use of the scheme to receive a payable credit can be critical for development runway and in getting to the close of a funding round.

Is the scheme tied into EU funding?

The Government continue to actively promote the scheme and in recent Budgets have made more funds available. However, there is a direct connection with EU research funding, of which the UK is one of the largest recipients. While the scheme itself is a UK Government initiative, at the conclusion to Brexit the landscape could change and therefore businesses should be looking at eligibility under the scheme sooner rather than later.

Consider claiming now

Following the onset of COVID-19 and the UK lockdown there has been an inevitable slowdown in development work while businesses safeguard their cash and keep abreast of the changing environment. Companies should consider shortening their financial year and making claims under the scheme earlier than they otherwise would have. HM Revenue & Customs (HMRC) have already demonstrated a vast improvement in approval of claims (and payment where a payable credit is due). Leadtime is down in the region of two to six weeks when compared with six to twelve weeks just six months ago.

Contact us

If you would like to discuss R&D tax relief in more detail, please contact your usual Blick Rothenberg contact or one of the partners to the right.