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Updates to Research and Development (R&D) Tax Relief Scheme for 2021

Posted on July 26, 2021

The R&D tax relief scheme was originally introduced to ensure the UK becomes the new global central hub for science and technology, with the Government setting itself a target of raising total UK investment in R&D to 2.4% of GDP by 2027. In the financial year 2018/19, £5.3bn of R&D tax relief funding was claimed across 50,000 claims. This shows a promising sign that the Government is on track to meet its objective for the UK to become a global leader in science and innovation. 

Overall, an aggregate amount of around £28bn in tax relief has been claimed across all of the R&D schemes (including the Research and Development Expenditure Credit – which is usually claimed by the larger companies). Therefore, this proves how effective this incentive is for boosting innovation, however, there are increasing concerns within the Government that R&D tax reliefs contain loopholes which makes this scheme prone to potential abuse and open to fraudulent activity. 

Since the budget announcement in March 2021, HMRC has taken three significant steps to solve the current issues: 

  • Recruited 100 additional staff – this is to have a larger capacity for reviewing R&D claims and maintain the efficient running of HMRC’s handling of the claims. 
  • Advance plans to carry through a ‘random enquiry programme’ – this is to deal with the growing concerns in fraud and error claims where the random enquiry programme can better understand the levels of the overclaim in order to draft up ways to prevent and reduce it for the future. 
  • Re-introduced a maximum cap on SME scheme cash claims – This is a cap on the cash credits for a Small-Medium Enterprise (of up to £20,000) + 300% of the company’s total PAYE and National Insurance Contribution for certain businesses. – This specific step could heavily affect SMEs that share their R&D resources across their corporate subsidiaries and/or outsource to third parties firms. 

As a result of these changes, there will be more challenges and obstacles to be faced during an R&D claim, with a renewed emphasis on the extent of the quality of evidence provided to support the claim. It is important to remember that these changes have been made to reduce the number of errors and fraud that has been occurring in previous years, therefore, one key aspect to a successful tax credit claim is to provide substantial proof from the claimant. 

Regardless of these new developments, here at Green Jellyfish, we have a group of dedicated R&D Tax specialists who guide your claim to success with full transparency at every stage.

 

If you are looking to make an R&D Tax Credit claim for your business (of any industry), the Green Jellyfish team are more than happy to help. 

Contact us at 033 000 20010