A science and technology superpower?

“We will make our country a science and technology superpower” were the words written by the Prime Minister in the 3 March 2021 'Build Back Better: our plan for growth’ policy paper.

Part of the plan to achieve this is the continued availability of various innovation tax reliefs, with perhaps the best known being R&D tax credits.

R&D tax relief provides significant relief or repayable tax credits for companies seeking advancements in science or technology.

With the announced increase in the main rate of corporation tax from April 2023, the benefit of R&D tax relief will only increase.

The government has regularly highlighted that it believes R&D tax credit relief is underutilised, and that the total value of the relief claimed is below their expectations.

Businesses are therefore encouraged to consider this relief and claim where eligible.

R&D cap

However, it is not all positive.

A new PAYE/NI cap is being introduced from April to avoid abuse of the relief, which will also no doubt impact on what would be genuine claims.

HMRC has also stated in letters to taxpayers that where claims have been made which do not in their view meet the necessary conditions, and those errors are due to a failure to take reasonable care, it will issue penalties.

It is understood that HMRC is further resourcing its specialist R&D unit to ensure it can review claims with more rigor, and presumably to ensure a quicker claims process.

Summary

A significant number of companies who could genuinely benefit from R&D tax reliefs are not claiming, and are being encouraged to do so. 

Claims will, however, be reviewed with more rigor in future, and those abusing the system (on purpose, or by simply not taking reasonable care) will not only see their claims rejected but could also suffer penalties of up to 100% of the tax relief being claimed in the most extreme cases (deliberate and concealed errors).

Penalties can still be as high as 30% for non-deliberate but careless errors.

The take away

R&D tax relief is a fantastic opportunity to help fund your business and should be considered where appropriate.

Taking specialist advice is key, not only to ensure valid claims are maximised but also to protect your business from significant penalties. 

Check out our R&D Knowledge Hub and our Technology, Innovation & Growth Knowledge Hub for more information.

If you would like to discuss how R&D tax relief could help your company, contact a member of our R&D team.

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