RandD Tax https://www.randdtax.co.uk Thu, 06 Aug 2020 12:23:26 +0000 en-US hourly 1 https://wordpress.org/?v=5.4.2 https://www.randdtax.co.uk/wp-content/uploads/2019/09/cropped-RandDTax_SiteIcon-32x32.png RandD Tax https://www.randdtax.co.uk 32 32 What standards should an R&D Tax Credit adviser meet? Part One. https://www.randdtax.co.uk/what-standards-should-an-rd-tax-credit-adviser-meet/ https://www.randdtax.co.uk/what-standards-should-an-rd-tax-credit-adviser-meet/#respond Wed, 05 Aug 2020 10:11:17 +0000 https://www.randdtax.co.uk/?p=7826 This is always a tricky topic to cover. Anyone who attempts it tends to come across as saying that they are “good” and the competition in part, or as a whole, is “bad”.  It is a very self-serving sales message. I am going to attempt not to do that. As the Compliance Director of RandDTax …

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This is always a tricky topic to cover. Anyone who attempts it tends to come across as saying that they are “good” and the competition in part, or as a whole, is “bad”.  It is a very self-serving sales message.

I am going to attempt not to do that. As the Compliance Director of RandDTax I do believe in what we do and that we get things right. That is what I can control.

PCRT

I am a member of a professional body subject to a code of conduct the PCRT (Professional Conduct in Relation to Taxation). Some providing R&D tax credit services are and some are not. It would be wrong to suggest that being subject to the PCRT guarantees a good service. Audit is one of the most regulated sectors of tax advice, but most people will have seen several high-profile scandals in this area involving the very large and very qualified accountancy firms. But at least if you are subject to a professional code if things go wrong an avenue of complaint exists to the professional body. If things repeatedly go wrong in one area then it can be looked at in terms of guidance, qualification, training, and Continual Professional Development (CPD).

Government Consultation.

The government is so concerned about standards in the tax advice market, as a whole, that they have launched a consultation. In recent years we have seen high profile tax issues in relation to audit, tax avoidance (e.g. Directors Loan schemes, and Film industry schemes), and around the impact of IR35. It will be interesting to see if the Government decides to go beyond the self regulation of the PCRT.

PCRT Topical Guidance on R&D tax credit services.

To return to the PCRT. Helpfully, the PCRT bodies, all the major UK taxation professional bodies, recently issued specific guidance on R&D Tax Services.

For an objective view on R&D Tax Credit services it is worth having a look at the PCRT R&D Topical Guidance. Ultimately, no matter what the level of regulation in any profession no greater power exists than the judgement of the informed consumer. This guidance, which is intended for “insiders”, is a good basis from which to make a judgement and gives a balanced view on good practise. It should carry more weight than anything any R&D consultancy says about themselves. It also shows a number of areas where R&D claims can go wrong. A good adviser helps avoid these.

I will make my own detailed comments on this important guidance in part two of this blog.

Christopher Toms MA MAAT, Compliance Director – RandDTax.

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What Impact Will the Pandemic Have on UK R&D Funding? https://www.randdtax.co.uk/what-impact-will-the-pandemic-have-on-uk-rd-funding/ https://www.randdtax.co.uk/what-impact-will-the-pandemic-have-on-uk-rd-funding/#respond Wed, 22 Jul 2020 09:12:20 +0000 https://www.randdtax.co.uk/?p=7686 The last few months has been a roller coaster for most Small and Medium Enterprises (SMEs) trying to cope with the negative business impacts of Covid 19. However, for innovative companies that are fleet of foot, there have also been new Research and Development (R&D) opportunities being created. Some commentators hold the view that overall, …

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The last few months has been a roller coaster for most Small and Medium Enterprises (SMEs) trying to cope with the negative business impacts of Covid 19. However, for innovative companies that are fleet of foot, there have also been new Research and Development (R&D) opportunities being created.

Some commentators hold the view that overall, in the medium to longer term, there will be greater commitment to R&D funding. However there are others that doubt the ability of the UK to maintain its ambitions for R&D spending, set out by Chancellor Rishi Sunak in his Budget 2020 statement – which included plans to increase public R&D investment to £22 billion per year by 2024‑25. (We highlighted the Future Fund & Increased Grant funding through Innovate UK in a blog back in April.)

How will the crisis impact innovation?

It is certainly the case that in some sectors innovation is being fast tracked by the opportunities thrown up to provide new solutions for problems created by the pandemic. “Just as World War Two is remembered for inventions such as penicillin and radar technology, it is highly likely that 2020 will be remembered for technologies developed to help fight pandemic disease outbreaks – isolation units, mobility tracking tools and many more. UK innovators are very much part of this fight and stand to reap the benefits of this effort in the future,” (Quote by Karl Barnfather, chairman of European intellectual property firm Withers & Rogers, published in an online article in Process Engineering).

Beauhurst in its mid-year UK equity market update (Equity Investment Market Update H1 2020) found that “Most sectors experienced a decline in deal numbers, including investor favourite’s fintech and artificial intelligence. But digital security and eHealth startups have thrived through lockdown.” Not surprisingly the report found that “Deal numbers declined, but not as much as we might have expected. A total of 911 deals were announced during the half year, a 3% decrease from the previous half and a 9% decrease from H1 2019. The total amount raised in H1 2020 totalled £4.77b — a 7% decrease from the previous period and a 30% drop from H1 2019. This remains the fourth highest level of funding raised in any half.”

On balance, my view is that investment in innovation and innovation funding for UK SMEs is going to be one of the bright spots in an otherwise quite uncertain economic future.

To check whether your recent or planned expenditure on Research and Development qualifies for R&D tax credits or relief contact us.

Follow these links for information on Innovate UK and UK Research and Innovation R&D funding rounds.

Blog by Linda Eziquiel, Regional Director, RandDTax

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Meet the consultants. Our R&D consultants on reforming the R&D schemes. https://www.randdtax.co.uk/meet-the-consultants-our-rd-consultants-on-reforming-the-rd-schemes/ https://www.randdtax.co.uk/meet-the-consultants-our-rd-consultants-on-reforming-the-rd-schemes/#respond Wed, 08 Jul 2020 08:51:49 +0000 https://www.randdtax.co.uk/?p=7490 As part of our new website build our consultants filled out a questionnaire. See the full responses on each consultant profile, as we go into more details about some questions and answers. Here are our insights on reforming the R&D schemes: The response that made me smile the most was from Vicky Hall one of …

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As part of our new website build our consultants filled out a questionnaire. See the full responses on each consultant profile, as we go into more details about some questions and answers.

Here are our insights on reforming the R&D schemes:

The response that made me smile the most was from Vicky Hall one of our Accountants and our Finance Director.

​”RDEC – what sort of mind invented this scheme?!Vicky Hall.

You need quite a bit of knowledge of RDEC and the SME scheme to understand this point. But the old Large Company scheme which had similarities to the SME scheme has been replaced by something completely different. If, as is possible, both types of scheme are applied to one claim they actively work against each other. One creates extra income (RDEC) the other increases the amount of expense relating to R&D (The SME additional deduction of 130%), they are opposites. New tax law should have simplification at its centre and RDEC is unnecessarily complicated.

The largest number of responses involved faster HMRC processing times of R&D claims. When the questionnaire was issued this was at the front of most consultants minds as the KPI of 95% of R&D Tax Credit claims being processed in 28 days had not been met very consistently for about 18 months. But HMRC have altered the process and to their great credit in the very difficult Covid 19 period have kept this crucial funding flowing.

The next most popular suggestion involves simplifying the schemes. To be honest there are aspects of the legislation which consultants have to explain to clients for compliance reasons that non specialists find hard to understand on the basis of reasonableness and common sense. Again in tax law this is not a good outcome. Consultants don’t enjoy being put in a situation where we are saying “I know it does not make sense but it is the law and you have to follow it”. In particular rules around EPWs, Subcontractors, Grants, and SMEs claiming under RDEC need simplification.

​”Make it less bewildering for SMEs so that they can more easily claim.Paula Newton.

​I would simplify the way the rules are published and explained. They aren’t particularly accessible.Jen Raison.

​”EPW costs could be qualifying even if they are not invoiced through a Ltd company.Tim Walsh.

As a long established specialist in our field, that is compliant (PCRT, Anti Money Laundering) and beyond that believes in behaving fairly in business, a few suggestions have been made about our profession based on the poor behaviour we sometimes see by competitors. Fees and the poor quality advice we sometimes see are concerning.

The Government or HMRC to cap the exorbitant fees levels some of the ‘ambulance -chaser’ R&D tax credit claims companies are charging. 20% to 40%+ is undeserved and not in the spirit of the scheme.Alan Crouch.

A very popular call has also been made by a few to increase the benefit to companies from the the R&D schemes. RDEC has just increased from 12% to 13%. But until we fully exit the EU and know which areas the UK government will be free to set policy on the SME scheme is limited by EU law. Public finances due to Covid 19 may also not allow greater spending.

​I’d double the level of benefit – if only!Linda Eziquiel.

A few consultants also suggested increasing the scope of the R&D schemes into areas or costs currently not claimable. This is being reviewed in a small way by the Government as a result of the March 2020 Budget. Arguably widening the scope could be a way to simplify the scheme.

We are actively engaged through the RDCC (R&D Consultative Committee, made up of HRCC R&D Tax specialists and Agents) and by contributing to consultations to improving the R&D schemes. If you would like to talk to us about your R&D claim get in touch here. We have the knowledge and experience to help you get your claim right.

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Meet the Consultants. Our R&D Tax Consultants on Giving Back and our work. https://www.randdtax.co.uk/giving-back-and-our-work/ https://www.randdtax.co.uk/giving-back-and-our-work/#respond Tue, 23 Jun 2020 11:31:50 +0000 https://www.randdtax.co.uk/?p=7458 RandDTax have a fantastic group of clients and consultants who are at the heart of what we do. We believe in supporting UK businesses of all types. Beyond our day to day work as part of our Giving Back initiative we do more than just helping businesses gain crucial R&D Tax Credit funding. GIVING BACK …

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The RandDTax team and Guests supporting the Fredericks Foundation Charity Golf Day in 2019.

RandDTax have a fantastic group of clients and consultants who are at the heart of what we do. We believe in supporting UK businesses of all types. Beyond our day to day work as part of our Giving Back initiative we do more than just helping businesses gain crucial R&D Tax Credit funding.

GIVING BACK

We support the Fredericks Foundation Charity which provides microfinance to groups that struggle to gain finance through traditional channels, such as women and those from black and minority ethnic backgrounds. In 2019 they won the Citi Microentrepreneurship Award for Resilience in recognition of this work. We believe this type of approach to funding helps create a fairer society.

The second element of Giving Back is the UK’s only totally free no strings attached full R&D Tax Consultancy service. This is available to start ups for their first accounting period. Starting a new company is extremely challenging. The aim of this free service is to help support them. Apply for free R & D tax credits consultancy here and mention Giving Back.

WHY WE LOVE OUR WORK!

As part of the launch of our new website we asked our consultants to fill in a “getting to know us” questionnaire. The full results can be found the profiles for each R & D tax consultant.

We only asked for one line answers to these questions and the consistent reply involved meeting innovative people and helping them gain funding.

“​I love learning about all the exciting stuff that SMEs are doing, and helping them submit their R&D claims so they can do more of the same.” Paula Newton.

“​Incredibly interesting and after I explain to potential clients the benefits and my process, and then I ask the question, what do you want to do? The universal response is – it’s a no brainer, get on with it.” Steve Richardson.

“​Hearing from many clients that their time with us is the most “profitable” per hour of their year!” Stuart Raison.

“I just love meeting all sorts of businesses and relish the joy that a Tax Claim settlement brings to them.” Jaime Lumsden.

It is a fun area to work in. So often the UK economy is talked down. The R&D schemes are a Great British success story and we are passionate about helping company’s gain the benefit.

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Finding Qualifying R&D Activity. The Cascade Effect and the Bow & Arrow. https://www.randdtax.co.uk/finding-qualifying-rd-activity-the-cascade-effect-and-the-bow-arrow/ https://www.randdtax.co.uk/finding-qualifying-rd-activity-the-cascade-effect-and-the-bow-arrow/#respond Wed, 10 Jun 2020 09:38:32 +0000 https://www.randdtax.co.uk/?p=7405 Many companies don’t claim R&D Tax Credits they potentially could. One of the big reasons for this is a lack of understanding about what R&D is for tax relief purposes. Quoting the “wordy” rules is unclear without context. Confidentiality often means clear examples and case studies are difficult to provide. Where they are given, plagiarism …

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Unlocking Software R&D Tax Credit Claims. Part 2. Technological uncertainties. https://www.randdtax.co.uk/unlocking-software-rd-tax-credit-claims-part-2-technological-uncertainties/ https://www.randdtax.co.uk/unlocking-software-rd-tax-credit-claims-part-2-technological-uncertainties/#respond Wed, 27 May 2020 08:44:34 +0000 https://www.randdtax.co.uk/?p=7382 Examples of technological uncertainties in software R&D claims. Malcolm Gladwell in his book Outliers popularized a 1993 psychology paper saying that anyone can master a skill with 10,000 hours of practice. I always find the opposite with my golf game, the more I practise the worse I get. I am also not sure he ever …

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Examples of technological uncertainties in software R&D claims.

Malcolm Gladwell in his book Outliers popularized a 1993 psychology paper saying that anyone can master a skill with 10,000 hours of practice. I always find the opposite with my golf game, the more I practise the worse I get. I am also not sure he ever read the HMRC R&D CIRDs (Guidelines)! But hopefully, my 8 years of experience working on software R&D claims will make the opinions below useful.

Background.

A scientific or technological uncertainty is key to any R&D claim. R&D is about pushing boundaries and overcoming challenges, and in an R&D claim Guideline context these are the uncertainties. In this blog I will give my thoughts on how to express technological uncertainties correctly in software claims and where mistakes are made.

Firstly, giving specific case study or generic examples carries dangers. The R&D uncertainties have to relate to your project and not someone else’s. Giving someone an example runs the risk they will copy it, and that is ill advised. A good quality narrative cannot be a “boiler plate” job, it must be specific to the claiming company’s activities and should be genuine and real and not generic.

Secondly, as technology is always moving, judging if a technological uncertainty is qualifying or not is very “point in time” specific. For example, to say in 2019 that responsive website design was a technological uncertainty on a software project is unlikely. But I am always interested in specifics before making a judgement. Technologies around responsive website design are now well established. 10 years earlier, around the start of smartphone and tablet software development, that may have been a technological uncertainty, but now it would appear routine and well known, so the opposite of an uncertainty. Technology moves on.

Thirdly, “one liner” uncertainties are often hard to judge without a broader context. In other words, a good narrative is about answering all the qualifying questions well and cannot be boiled down to one detail. Confidentiality makes it hard to give entire reports as case studies, just some anonymised and edited examples.

Examples.

With these three caveats here are some examples.

  • The software had been written to use microservices. But a requirement was to audit the processing of data. It was an uncertainty as to how to track processing through multiple microservices?
  • The software integration sought to use the Microsoft XRM Tooling connector. This was poorly documented (At that point in time) and blogs did not answer the challenges we faced. It did not behave in the way a REST API would for example but delivered the advance we sought. This created uncertainties that were not readily deducible or a matter of public knowledge.
  • How to impose a security regime on another application without having access to the source code of the other application or any obvious ability to modify its behaviour?
  • How do we allow the system to parse the user-defined configuration and compile the data access method at run-time in an acceptable timeframe?
  • How does the performance of the proposed storage models vary with increased metadata complexity? How do we minimise this impact?
  • About Single Sign On (SSO), after baselining and researching the solutions available in the market, the initial plan was to use an off-the-shelf product with minimal-to-no customisation. The selected software was WS02. However, this strategy proved naive as many uncertainties arose when the integration process began and there was the need to modify long-established software, particularly on extremely sensitive dataflows (authentication and access management).
  • Internet of Things (IOT).  Could the selected technologies cost effectively scale to the number of systems, complexity and the amount of data generated by a single building, which could easily be in the Petabytes?

The right approach?

These are just snapshots from a several past R&D claims. They give some level of insight but are hard to judge as they are extracts from full reports. What can be learned?

  • The language needs to be technical. A good technological uncertainty must imply an understanding of the technology. Specifically, that the knowledge comes from a competent technical professional. Explain in plain language and then get technical is a good strategy. I have avoided highly technical examples as without context they are not useful. Also, they don’t make good blog content.
  • Talking about functionality (What the software does) and especially the application area is generally best avoided. High level over views are not technological uncertainties and they give an impression that a competent technical professional has not been involved in the project. This is “blood in the water” in terms of presenting a claim as being doubtful in terms of qualifying.
  • Dig deep rather than take a high-level approach. Talk to your techies not the salesman. Detail is your friend. This is easier in small organisations. The most straightforward software claim I deal with involves a “one man” company, the MD is the techie and he lives the development process. The level of detail he knows produces a strong narrative. Counter to that a large development team with day to day work pressures and layers of management, you really have to dig deep to identify and collect the good experiences that explain the R&D. Effective processes to capture the R&D detail are particularly important in large organisations. If you rely on an individual recollection you run into two problems, they might forget, or they might leave. Neither is helpful if HMRC wish to challenge a claim.
  • Struggling to write an uncertainty? Start with the word “How” outline a technical challenge and end with a question mark.
  • The biggest own goal? “We did not know how to?” “It was new to us.” “We lacked experience in ….”. Technological uncertainties and advances must be broader that just the company’s skillset.  The baseline from where and uncertainty has to be described and must answer “Is it readily deducible by a competent professional in the field?” not “Is it readily deducible by someone with no knowledge or experience of the issue they face”!

To correctly claim all that can be done is to case by case work through the Guidelines, make a case based on the work done, and then take a view on the strength of the claim. This is the process a good experienced R&D consultant helps you through. It is a two-way process. Get in touch today to see how we can help you claim the R&D Tax Credits you could be entitled to claim.

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Software R&D Tax Credit Claim: Tribunal Decision relating to AHK Recruitment Limited. https://www.randdtax.co.uk/software-rd-tax-credit-claim-tribunal-decision-relating-to-ahk-recruitment-limited/ https://www.randdtax.co.uk/software-rd-tax-credit-claim-tribunal-decision-relating-to-ahk-recruitment-limited/#respond Fri, 22 May 2020 08:43:37 +0000 https://www.randdtax.co.uk/?p=7344 It is worth keeping a close eye on tribunal decisions, relating to R&D Tax Credit claims, to see if there are any changes in interpretation and lessons to be learned. We were not involved in this claim. This software related R&D Tax claim was turned down by an HMRC inspector and the appeal was rejected …

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It is worth keeping a close eye on tribunal decisions, relating to R&D Tax Credit claims, to see if there are any changes in interpretation and lessons to be learned. We were not involved in this claim. This software related R&D Tax claim was turned down by an HMRC inspector and the appeal was rejected at tribunal.

In my opinion nothing particularly new comes from looking at this tribunal decision. It is a case study in how not to claim correctly and how not to handle an HMRC enquiry. In that respect it is useful in giving an example of what not to do. I am not going to completely dissect the information in the tribunal decision. I can see several apparent errors and am surprised this went to a tribunal.

The full detail can be found here:

1. Claim correctly examining the work in line with the R&D Guidelines in particular BIS 2004.

This tribunal involved HMRC turning down what ultimately was a software related R&D claim. I use the word “ultimately” because the initial submission did not make that clear and focused on human behaviour/social science. R&D claims are restricted to advances in hard science (Chemistry, Physics, Biology) and technology. Social science does not qualify.

2. Identify the competent professional. He/She must be involved in and understand the claim. Without that involvement you have no claim.

It appears that the claiming company did not get particularly involved in defending the claim. Just the adviser “Optimal Compliance”. A competent professional as defined was not involved. As a sales point some R&D Tax Consultancies or accountants will claim to “do all the work for the claiming company”. This is attractive. But it is also completely incorrect. To claim successfully and have a defendable claim at enquiry the claiming company must be involved in the claim. Plus understand how the guidelines relate to the work claimed. An R&D claim goes on a company tax return. Ultimately the company and its Directors are responsible. Reading the tribunal decision that collaborative process appears to be lacking.

3. Handle the claim and any HMRC questions promptly and professionally.

The trail of correspondence and the timelines are revealing in the tribunal decision. An R&D claim involves technical understanding of the Guidelines, but it also involves good judgement about them. An HMRC Inspector also must make a judgement. If he or she sees an initial submission not following the guidelines. Then struggles to get answers to their reasonable questions on time, and sees the fundamentals of the claim shift. It is obviously going to impact the judgement made. My only real surprise about this case was how patient the inspector involved was. HMRC have the power to demand information and fine a company for each day the evidence is not produced. R&D claims involve public funds & should be taken seriously.

4. Find an experienced and qualified R&D adviser and listen to them.

We started a move to establish a professional body for R&D advisers. Currently, it is a business anyone can start with no qualifications. We were for example approached by someone who had bought a marketing list, gone on LinkedIn, and signed up three R&D claim clients at a rate of 30% of the claim benefit. They approached us to solve the one problem they had; they did not know anything about making an R&D claim! I really would advise claiming companies to carefully consider who they appoint as advisers. Look for established consultancies with good track records. Not a salesperson who calls you up and tells you that you qualify, and no work is involved! Or someone that gives you a DIY online form. As the detail of this tribunal shows there is quite a lot involved in an R&D claim. But with over £5 billion of support to UK claimants a year it is worth the effort. Effort is required by all involved. If you do not make the effort don’t complain about the train wreck that may follow.

Our HMRC enquiry service.

We have helped many companies who have claimed themselves or with other advisers and run into trouble at HMRC enquiry.

This process starts with a free no obligation document review. If a claim is baseless, we will advise you of that and not take on the work. If we think the claim is defendable, we quote a time-based fee to take on the work.

Please get in touch today to discuss your R&D Tax Credit Claim.

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What’s the Latest Data on the Billions Going to SMEs in R&D Tax Credits? https://www.randdtax.co.uk/whats-the-latest-data-on-the-billions-going-to-smes-in-rd-tax-credits/ https://www.randdtax.co.uk/whats-the-latest-data-on-the-billions-going-to-smes-in-rd-tax-credits/#respond Fri, 15 May 2020 14:18:10 +0000 https://www.randdtax.co.uk/?p=7275 In April 2020 the UK Government released Research and Development Tax Credits Supplementary breakdowns: April 2020. These followed the statistical report and detailed tables released in October 2019. I have taken a look at both sets of data and created some charts and tables to illustrate trends, including the rise in claim levels and which …

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In April 2020 the UK Government released Research and Development Tax Credits Supplementary breakdowns: April 2020. These followed the statistical report and detailed tables released in October 2019.

I have taken a look at both sets of data and created some charts and tables to illustrate trends, including the rise in claim levels and which Regions and Sectors are getting the benefits.

It needs to be kept in mind that there is a data lag due to companies being able to claim going back two years. The data released in October 2019 was based on claims for R&D tax credits made in Company Tax returns received on or before 30 June 2019 and therefore the 2017-18 figures represent partial data and are expected to increase as more returns are received by HMRC.

The following table shows that at the last count in 2017-18 around £2.5 billion went to UK Small & Medium Enterprises, compared to just £250 million ten years earlier. It is expected that the 2017-18 level will reach around £3 billion when all claims have been completed.

Data released in April 2020 gave an indication of the amount of funding per Sector and Region. The table belows shows that the London Region claimed the most funding at £675 million followed by the South East Region at £430 million (based on post codes – see the notes below the chart).

The sector in London that received most funding was Information & Communication – which will include the Fintech and Software development companies based in London.

Overall, across all regions the Professional, Scientific & Technical sector represented the largest share of funding at £640 million followed by the Professional, Scientific & Technical sector at £625 million and Maufacturing at £490 million.

Funding per Region (SMEs)
The graph below shows the funding per region in order of scale with the largest first, again based on post codes (see note under the table above). The top three regions, London, the South East and the East of England, between them shared £1,405 million which equates to just under 58% of all the funding going to SMEs, while the bottom three, Wales the North East and Northern Ireland shared between them £185 million, just under 8% of the total funding going to SMEs.

Funding per Sector (SMEs) The graph below shows the funding per sector in order of scale with the largest first. There are other sectors that are not listed as no significant funding went to them. The top three sectors, Professional, Scientific & Technical, Information & Communication and Manufacturing between them shared £1,755 million which equates to around 80% of the total funding going to SMEs.

Link to HMRC source: https://www.gov.uk/government/statistics/corporate-tax-research-and-development-tax-credit

RandDTax have helped over 1250 companies gain almost £140 million in benefit from the R&D Tax Credit schemes. If you would like to discuss a claim please get in touch.



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The Bounce Back Loan Scheme & R&D claims. https://www.randdtax.co.uk/the-bounce-back-loan-scheme-rd-claims/ https://www.randdtax.co.uk/the-bounce-back-loan-scheme-rd-claims/#respond Fri, 15 May 2020 10:43:06 +0000 https://www.randdtax.co.uk/?p=7261 The Bounce Back Loan Scheme (BBLS) enables smaller businesses to access finance more quickly during the coronavirus outbreak. This Bounce Back Loan Scheme is designed for small businesses and is 100% government guaranteed to the lender, and is very easy to obtain.  Any limited company or partnership can claim an interest/and admin cost free loan …

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The Bounce Back Loan Scheme (BBLS) enables smaller businesses to access finance more quickly during the coronavirus outbreak.

This Bounce Back Loan Scheme is designed for small businesses and is 100% government guaranteed to the lender, and is very easy to obtain.  Any limited company or partnership can claim an interest/and admin cost free loan of up to 25% of their annual turnover, maximum £50k, subject to the business being solvent at the end of December 2019.  This loan could give you added security against unforeseen events, over the next 12 months, interest and cost free, and can be repaid at the end of that period, by which time we hope that there will be no more uncertainty following the current crisis.  If it cannot be repaid at that time it can be paid off over the next five years including a fixed interest charge of only 2.5% per annum.  I learned about this through an FSB webinar.  

You cannot claim if you are already claiming under one of the other covid related government schemes.

The BBLS scheme is tailored towards smaller companies and fills the gap which the terms of the above three schemes left.

INTERACTION WITH R&D TAX CREDITS

The interaction action of other State Aids with R&D claims is a complex area. It is best to seek professional advice case by case when weighing up the impact of decisions like taking any of these Government backed loans. An SME R&D claim is in itself a State Aid. Due to the level of this aid rules exist when combining it with other State Aids. I will make the following general points.

  • These loans are generally for business support not R&D projects. If the loan does not impact an R&D project then the State Aid from the loan does not need to be considered when making an R&D claim.
  • If all a company does is R&D, or it is a large proportion of its activity, then the State Aid will impact an R&D claim. But unlike other schemes mentioned the BBLS is being treated as a de minimis aid. So specific rules apply.
  • The normal de minimis rules are covered in our FAQs. But due to the Covid crisis the limits on de minimis aid were changed by the EU Covid-19 Temporary framework. They are more generous. The aid remains de minimis, businesses do not have to self declare it as a State Aid, if since the 1st March 2019 they have not received £711,200 (€800,000) in de minimis aid.
  • This is important because £1 of de minimis aid means that the de minimis element as qualifying expenditure in an R&D project can be claimed under RDEC. The rest of the project claimed under the SME R&D Tax Credit scheme. This is a positive as if the aid was a State Aid then £1 of that aid would mean the entire project expenditure could only be claimed under RDEC. RDEC is roughly worth 1/3 the amount of an SME claim.
  • If a a business was a “business in difficulty” prior to 31st December 2019 the de minimis rules are applied differently. See the details here.

All things considered and knowing the relationship between overall activity and R&D activity for my clients I would be surprised if the BBLS loans had much impact on the level of R&D claims. If it does it will only impact a portion of a projects costs by taking them out of the SME scheme.

The bigger impact in these difficult times will be the lack of actual R&D work being done due to the isolation measures.

We believe in supporting UK business if you need any help with R&D claims please contact us.

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