11th March 2020 marked the date of the 2020 Budget announcement. We waited in anticipation to find out if there are any notable changes for the R&D landscape and we were in luck!
Previous budgets have announced the first round of investment for the Industrial Strategy Challenge Fund and incremental changes to the R&D Tax Relief schemes.
So, this time, what are the hot topics?
Increasing R&D Investment
“The Budget sets out ambitious plans to increase public R&D investment to £22 billion per year by 2024-25. This landmark investment is the largest and fastest ever expansion of support for basic research and innovation, taking direct support for R&D to 0.8% of GDP and placing the UK among the top quarter of OECD nations – ahead of the USA, Japan, France and China.”
Supporting world-leading research – universities and research institutes
“The government is providing an immediate funding boost of up to £400 million in 2020‑21 for world-leading research, infrastructure and equipment. This will help build excellence in research institutes and universities right across the UK, particularly in basic research and physical sciences.”
R&D Tax Credits
RDEC % Increase
“Research & Development Expenditure Credit (RDEC) rate – The rate of RDEC will increase from 12% to 13% from 1 April 2020, supporting businesses investing in R&D and helping to drive innovation in the economy.”
PAYE cap for SME Scheme delayed
“Preventing abuse of the R&D relief for small and medium-sized enterprises: Summary of responses and consultation – Following consultation last year, the introduction of the PAYE cap on the payable tax credit in the SME R&D schemes will be delayed until 1 April 2021. The government has listened to industry and will also consult on changes to the cap’s design, to ensure it targets abusive behaviour as intended while ensuring that eligible businesses are able to access the relief.”
R&D Qualifying Costs
“Consultation on R&D tax credit qualifying costs – The government will consult on whether expenditure on data and cloud computing should qualify for R&D tax credits.”
With the increase in R&D investment, we don’t yet have a clear indication of what topics or where this investment will end up. We hope it will continue to fund industry projects, keeping the UK at the forefront of innovation and building our economy!
The increase in the RDEC Scheme is self-explanatory. As the RDEC scheme welcomes claims from both large enterprises and SMEs, the additional percent is a bonus for all businesses utilising the scheme!
The SME Scheme PAYE cap was originally destined to be put into effect from April 2020. As it stands, the cap will be three times the company’s total PAYE and NICs liability for that year, once implemented in 2021.
We hope that the results of the consultation will allow data and cloud computing expenditure to qualify, allowing businesses working in the relevant sectors to take further advantage of the R&D Tax Credit schemes and be fully rewarded for their innovative work.
Overall, the budget has highlighted the government’s commitment to continue to fund R&D, increasing investment and reward for innovation, which is welcome news for us all!