The 2018 Autumn Budget welcomed lots of new changes for the betterment of the economy, with a key focus on 1 thing – Britain being prepared and adaptable for the new age that we are currently living in.
Chancellor Phillip Hammond stressed that scientific and technological advances are the key solution to issues with productivity across the UK and something we should strive to commit to.
In order to continue to give incentives to hard-working Brits, steps are being taken to increase wage growth and take-home pay, as well as steps set to be taken to protect the fairness of the distribution of the funds allocated to the R&D Tax Credits Initiative.
The Chancellor, with the support of the conservative party, stated that Britain is and should be striving for a more ‘dynamic economy’, in order to support an ever-changing technological Britain. In saying that, a new Tax Law will be introduced to enforce a ‘narrowly targetted’ tax on revenues generated in the UK within specific digital platform business models. ‘UK Digital Services Tax’ has been ‘carefully designed’ to ensure it is ‘established tech giants’ that ‘shoulder the burden’; affecting digital brands profitable and generating over £550m a year, such as Google and Facebook.
The Chancellor also claims that many of the steps being taken are to work towards a ‘high wage high skill economy of the future’ which sees Britain continue to be one of the highest functioning economies in the world. But surely these achievements can’t be met without some support from our Government? Correct, which is why the budget saw new announcements to encourage business productivity, such as:
- Funding for 10,000 entrepreneurs
- Cutting contributions in half to 5% for smaller firms supporting apprentices.
- Fellowships to attract the best talent in the world.
- Income tax personal allowance to rise from £11,8509 to £12,500 to incentivise employees.
- Increasing annual business investment allowance from £200,000 to £1M for two years
- Business rates are also set to be cut by a third for all retailers in England with a rateable value of £51,000 or less, leading to an annual saving of up to £8,000 for up to 90% of small firms.
The new practices following the budget announcement have evidently been put together in order to stimulate business investment across the UK, just as with the R&D tax incentive, with the Chancellor stating ‘the real engine of growth is enterprise’ when addressing plans to fuel economic growth. The key objective for the future is to make Britain the ‘winners of the technological future’ by ‘backing businesses to invest and grow’.
How have R&D Tax Credits been affected?
The main focus around R&D tax credits changes for this year has been to protect the authenticity of the ‘most generous corporation tax relief available in the UK‘. Plans have been put in place to prevent the abuse of the flexible eligibility process and ensuring that the most hardworking, economy-boosting companies are earning what they deserve from the R&D tax credits budget.
This is nothing for regularly claiming businesses to worry about, with a promise to leave close to 95% of companies currently claiming unaffected. Similarly to the clamp down on tax evasion, this new process has been put in place purely to ensure honesty and fair distribution of funds and taxes within our economy.
The Chancellor has no plans to cut any of the funds allocated to the R&D tax credits budget, as studies in the R&D Tax Credits Statistics for 2018 found that ‘for every £1 of tax forgone £1.53 to £2.35 of R&D is stimulated’.
The changes are as follows: ‘To help prevent abuse of the research and development (R&D) SME tax relief by artificial; corporate structures, the amount that a loss-making company can recover in R&D tax credits will be capped at three times its total Pay As You Earn (PAYE) and National Insurance contributions (NICs) liability.’
To put it simply, HMRC has created measures to ensure that only companies with genuine R&D activity are eligible to claim. This change has been made necessary by companies with ‘no legitimate R&D activity’ attempting to claim. The 2018 Autumn Budget also states that ‘HMRC also identified structures set up deliberately to claim the payable tax credit’ despite having little UK activity, ensuring that the relief is awarded only to companies with a ‘real UK presence’.
Does this make eligibility tougher?
Absolutely not. HMRC have been taking steps to ensure a more streamlined eligibility process for a while now, which means we’re already a few steps ahead of the budget announcement and experienced with identifying companies which qualify, the rates for which have met record numbers in the past year.
How do I find out if I’m (still) eligible?
A 10-minute phone call with an R&D Tax Expert requires little preparation. This is a relaxed conversation through which an expert can guide you through your recent projects and identify and qualifying areas of R&D activity. What’s more, it’s completely free to find out if you’re eligible and there’s absolutely no obligation to go through with creating a claim. Call today on 0161 743 3656 or Find Out More.