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  • The government has an ambitious target to raise total investment in research and development to 2.4% of UK GDP by 2027. R&D tax reliefs pay a crucial role in incentivising this investment by providing generous tax reliefs to companies undertaking qualifying R&D. It is therefore important to ensure that the reliefs remain up-to-date and well targeted. 

    At Budget 2021, the government announced a review of the reliefs, supported by a consultation with stakeholders to explore the nature of private-sector R&D investment in the UK, how that is supported and where changes may be appropriate. The consultation closes on 2 June 2021. 

    Overview of the R&D regime

    R&D reliefs are currently available under two schemes:

    • SME scheme: 230% deduction or tax credit of 14.5% if the company is loss-making. This scheme is only available to SMEs; and

    Consultation topics

    The broad-ranging consultation considers various aspects and invites responses on whether the two current schemes should be combined. The consultation also considers the location of R&D claims and whether R&D reliefs could be used to incentivise R&D with a social value, for example, development of green technology. 

    There is also a possibility that the government may consider restricting relief in some situations where the R&D activity takes place outside the UK. 

    The consultation broadly covers the following aspects:

    • How the two R&D relief schemes support R&D in the UK, including how they operate, how they interact with the way modern R&D is done, and the main differences in design between them;
    • Whether the schemes should be amended to remain internationally competitive and keep the UK at the cutting edge of innovation;
    • Whether the definition of R&D and the scope of what qualifies for relief remain fit for purpose; and
    • Whether current rates of relief, and the difference in rates between RDEC and the SME scheme, remain appropriate. 

    The government is interested in receiving representations from a wide range of interested parties and stakeholders and is particularly interested in responses from:

    • Firms that undertake R&D, or might consider doing so in future;

    • Business groups and trade associations;

    • Accountants and accountancy bodies; and

    • Academic institutions (universities, scientific research bodies).

    R&D tax reliefs are one of the most generous reliefs offered by the UK tax system and can be a very useful source of cash impetus particularly in the current climate, by providing cash tax savings of up to 33% of qualifying R&D expenditure. 

    With the government’s continued commitment to raise investment in research and development, R&D tax reliefs are here to stay. At ETC Tax, we have a dedicated team of R&D tax advisers who have several years of specialist experience of managing the R&D claim process and can handle your or your client’s R&D claims from start to finish.

    If you would like to discuss whether you or your client qualifies for this general relief, please get in touch.

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    Please provide as much detail as possible in regards to the reason for your enquiry so our tax advisers can prepare and tailor their response to reflect your needs. We will endeavour to - respond / call you back - to discuss your enquiry and you will not be charged for this time.

  • This field is for validation purposes and should be left unchanged.