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Research & Development Amendments for 2021

Posted on June 28, 2021

The Research and Development scheme had a small change which came into effect just after, 1st April 2021.

What is the new Measure & Who is Likely to be affected?

This change will affect SMEs (small or medium-sized enterprises) that carry out R&D related activities. 

The new proposal will limit the amount of payable R&D Tax Credit which an SME can claim to £20,000 plus 300% of its total PAYE (Pay as you Earn) and NIC’s (national insurance contributions) responsibility for the period. A company is exempt from the cap if: 

  • It does not spend more than 15% of its qualifying R&D expenditure on subcontracting R&D to EPW’s (externally provided workers).
  • The employees are creating, preparing to create or managing IP (intellectual property).

Overview

Even though the change is only minor, it feels like there is a fair amount to digest therefore, we have tried to break it down into more palatable bitesize chunks.

  • The following changes to the R&D SME tax relief came in on 1 April 2021.
  • A cap on the amount of the payable R&D tax credit will be introduced.
  • A company making a small claim for payable credit below £20,000 will not be affected by the cap.
  • A company will be able to include related party PAYE and NIC when calculating the cap and these will be subject to the 300% multiplier
  • A company’s claim, of any size, will be uncapped if it meets two tests. These tests require that a company’s employees are creating, preparing to create, or actively managing Intellectual Property (IP) and that its expenditure on work subcontracted to, or externally provided workers provided by, a related party is less than 15% of its overall R&D expenditure.

We don’t want you to miss out on this tax relief, so we urge you to check your eligibility today (it takes just a few minutes). If you’re eligible, great! If not, then at least you have the peace of mind of knowing that you explored the possibility. https://www.greenjellyfish.co.uk/contact/