Rishi Sunak’s second Budget follows a year of unprecedented economic challenge as a result of the COVID-19 pandemic. An investment-led recovery, with the government supporting the scale-up of the most R&D-intensive UK businesses, was very much a part of yesterday’s narrative.
It’s fantastic to see the government continuing to recognise that innovative, rapidly-growing businesses will be a key driver of future growth, setting an ambitious target of raising total investment in research and development to 2.4% of UK GDP by 2027.
Some of yesterday’s announcements were news to us, such as the Consultation into both schemes. Others we knew were coming, such as the PAYE Cap coming into play from April 1st.
Here’s a brief summary of what you need to know.
#1 R&D tax reliefs: Consultation launched
The government announced that they will carry out a review, considering all elements of the two R&D tax relief schemes, to ensure that the reliefs remain up-to-date, competitive and well-targeted.
A consultation seeking views from stakeholders on the current scheme, and on any changes that may be appropriate, launched yesterday and will run until 2 June 2021.
R&D tax reliefs have a key role in incentivising investment in research and development, reducing the costs of innovation, and ensuring that the UK remains a competitive location for cutting-edge research. We welcome this initiative and will be filling our own submission, to make sure they remain fit-for-purpose, in a rapidly changing environment. Do get in touch with us on your thoughts of what works and what could be improved.
#2 Data and cloud computing costs
Last year the Government consulted on bringing data and cloud computing costs into the scope of R&D tax reliefs (learn more in our blog here).
A summary of the results has been published, showing a significant appetite amongst stakeholders for doing so. However, the decision on whether, and how far data and cloud computing costs will be brought into the scope of qualifying expenditure will now be taken alongside the wider review of R&D tax credits.
#3 Future Fund: Breakthrough
The Government confirmed the launch of a new £375m fund that will see investment in fast-growing UK tech startups.
The UK-wide Future Fund: Breakthrough initiative will invest in highly innovative companies looking to raise at least £20m of funding. This again shows that technology is at the centre of the Government’s vision for the UK economy.
#4 PAYE cap
Designed to protect the SME R&D Tax Relief scheme from abusive claims, the government announced last November that a PAYE Cap would be implemented on April 1st, 2021.
For accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a business can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and NICs liability. (Find out more in our blog here)
Yesterday’s budget announced a change that has been made since the November draft. Where a company has an accounting period that straddles 1 April 2021, the measure does not apply to the part of the period from 1 April, but instead, only affects the next full period starting after that date. This will give companies confidence that they will not need to apply the new rules to a current accounting period.
Need guidance? Speak to our team to understand how these new changes may impact your claim.