Last month the UK Government indicated its continuing support for R&D tax relief in the Queen’s Speech, highlighting both a proposed increase in the rate of relief and a review of qualifying costs. R&D tax credits were first introduced back in 2000 and are a key way by which successive governments have incentivised companies to undertake valuable R&D activity in the UK.
For tax paying companies, the savings under the R&D schemes are significant, with eligible SMEs being able to save almost £250 of tax for every £1,000 spent on qualifying R&D costs. The reference to the increased rate is relates to the R&D scheme for the largest companies, which currently provides a credit of 12%, equating to a tax saving of 9.7% of qualifying costs. The proposed rate change to 13% would increase this saving to 10.5%.
Of interest to companies of all sizes is the proposed review of costs which qualify for relief, with a view to extending the definition to cloud computing and data. The current guidelines were last updated approximately 10 years ago, at a time when investment in areas such as this were not anticipated. Whilst the extent of the review is unclear – there have been calls to include ‘the purchase of data for research purposes and digital infrastructure to support R&D’, ‘the use of algorithms in research’ and ‘user interface and user experience research’ – we shall have to wait for the conclusion of the review, with further information likely in the upcoming Budget in March. However, costs such as these are often a significant part of an R&D project and this review can only be welcomed.
Although the relief increases in popularity each year, HMRC believe the relief is underclaimed and we would encourage all companies to review their eligibility for this very valuable relief.
Claiming R&D tax relief is simpler than you may think. So if your business is making an ‘appreciable’ improvement in technology or science, you could join the thousands of innovative companies nationally that have already benefited from R&D tax reliefs.
To find out more, please contact a member of the Radius team and let us show you how easy it is to make your innovation pay.
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