How the July Budget could give R&D spending plans a boost
Supporting recovery post-coronavirus
Chancellor Rishi Sunak has now revealed his ‘mini Budget’ which was set out on July 8th. It consists of a host of measures to support businesses and individuals in weathering the COVID-19 economic storm through cash savings and job creation. It is hoped too that such a financial leg-up could bring a significant boost to research and development spending.
In summary, the new measures designed specifically to support UK businesses include:
Job Retention Bonus
The flexible furlough scheme is due to finish entirely on the 31st October 2020. However, for every employee that returns from furlough and is still working on the 31st January 2021, the government is offering companies a £1,000 bonus incentive per staff member. See more about the Job Retention Bonus.
VAT rate cut to 5% for businesses in the hospitality sector
VAT will be cut to just 5% on accommodation, leisure attractions and food. This will come into effect from the 15th July 2020 until the 12th January 2021. It also includes hot and cold takeaway food, pubs, B&Bs, cafes, restaurants, hotels, cinemas, theatres and camp sites.
The KickStart Scheme
The Kickstart Scheme pays employers directly if they create new jobs specifically for any 16 to 24-year-olds who are at risk of unemployment. The jobs must be newly created, be of 25 hours a week or more, and staff must be paid at least the National Minimum Wage. If an employer qualifies, the wages of the young person will be paid by the government for six months, in addition to help with overhead costs.
For the next six months, any employers taking on a new apprentice can receive a bonus from the government of £2,000 per apprentice for those under 25. For apprentices over 25, employers will receive £1,500 instead.
£1,000 for businesses to take on trainees
Employers that take on a new trainee can now receive a £1,000 bonus. Sector based training places will be tripled, and further funding will be offered for more level 2 and 3 courses.
Eat out to help out
The “Eat out to help out” incentive means that diners can get 50% off their meal if they eat in any UK restaurant or café on Mondays, Tuesdays or Wednesdays in August. The government will then give the business the difference (registration required), and the maximum discount is £10 per head.
How businesses may spend this new cash injection
These new measures will undoubtedly be welcomed by businesses up and down the country who are struggling with the economic fallout of coronavirus. But exactly what that money will be spent on once it’s received will vary massively between businesses.
Short term spending versus long term investment
Obviously the main thing many organisations require money for at the moment are day-to-day operational costs. Staff and suppliers need paying, loans and credit agreements need to be met and rents need servicing. But businesses which are managing to keep their heads above water can also take this opportunity to innovate and grow. Indeed, Rishi Sunak’s spending plans will go a long way towards paying for these plans, as will ongoing government support in the form of R&D Tax Credits and R&D Grants.
Such long term R&D investment may involve:
Acquiring new technology
Investing in new technology can be incredibly expensive, and it may not start paying for itself for some time. Such technology can come in all sorts of forms, from new computer systems to heavy duty machinery, equipment and tools. Plus of course there are ongoing maintenance costs to be considered too.
Moving to new premises
Over time, growing businesses will need to either move to a bigger facility or expand into additional ones. This requires money, not to mention the costs involved in moving.
Branching out into new markets
When a business looks to expand it may wish to sell its products in new markets further afield. It may also seek to alter or expand its client base, or take on units abroad. Financing will be required here to cover research, advertising and marketing costs as well as setting up new outlets.
Developing and marketing new products
It’s a competitive world and markets move fast, so companies need to stay ahead of the competition. This is why developing new products and updating existing product ranges is so important, in addition to the testing and marketing of these products. There’s often a substantial amount of R&D involved here.
The key point here is that if your clients have undertaken any of the above types of activities then take note: If the work has, crucially, involved some form of technological of scientific research then R&D Tax Credits could well we claimable.
R&D Tax Credits in a nutshell
- Any UK company can claim R&D Tax Credits regardless of size, turnover or sector
- The relief is claimed either as reduction in Corporation Tax (if the company made a profit) or as a cash payment for those that made a loss
- A much as 33 pence in every £1 of R&D expenditure can be claimed
- A technological or scientific advancement must have been made where the outcome was uncertain at the start of the project. This could be a simple as creating a new product or service, or significant upgrading an existing one
- A huge range of costs can be included in a claim for R&D Tax Credits, including staff wages, overheads, materials, fuel and employer costs
Sound like one of your clients? Have a look at our R&D Tax Credits page for more details, plus you may find our recent blog 5 Steps In Making A Successful Claim For R&D Tax Credits useful too.
Let us help you to help your clients
Myriad Consultants is a UK-based R&D specialist consultancy offering the most up-to-date, comprehensive R&D advice around. And, when clients are ready to make a claim our Tax Cloud portal for accountants will guide you through the R&D tax relief claims process in a fully supported way to get them the relief they’re owed.
If you would like to see how our team can work alongside you in offering a more comprehensive R&D tax relief service, feel free to call us today on 0207 360 4437 or drop us a message