The Chancellor sent a clear message in the recent Budget that the development of UK plc will be led by research and development. Rishi Sunak outlined a plan to invest in research and development (R&D) and cutting-edge technologies.
The government will increase investment in science, innovation and technology to £22 billion by 2024-24, with £900m in nuclear fusion, space and electric vehicles. This takes publics spending on R&D to 0.8% of GDP.
From 1 April 2020, the rate of RDEC will increase from 12% to 13%. This has a positive impact on the value of R&D claims for some of our R&D clients. R&D Expenditure Credit (RDEC) is claimed by large companies, and SMEs who are unable to receive relief under SME R&D tax credits due to having received some form of government grant funding.
In the 2018 Autumn Budget, the government announced that it will re-introduce a PAYE and NIC cap on the SME payable credit to address potential abuse of the relief. For accounting periods beginning on or after 1 April 2020, the maximum payable R&D tax credit a company can claim would be set at 300% of the company’s total PAYE and NIC liabilities for the period. Following consultation last year, the government has now decided to delay the introduction of the cap until 1 April 2021. There has been ongoing consultation around this cap and how it could negatively impact the relief available to most start-up businesses who do not have employees on its payroll.
Finally, at the moment and as you may be aware, cloud hosting is a software cost which is not eligible under both SME and RDEC schemes, and this can sometimes significantly reduce the claim value for our tech clients. The government will consult on whether expenditure on data and cloud computing should qualify for R&D tax credits.
If you would like to learn how it affects you contact us to speak with an R&D Tax Credits claims expert.