How might the landscape for funding and financially rewarding innovative UK businesses who invest time and money in R&D look post-Brexit? And will Brexit affect R&D tax claims? Luvo Partner Ian Batkin shares his thoughts.
To answer the question of if Brexit will affect R&D tax claims, I believe the value of the UK government’s R&D Tax Credits scheme to innovative companies could be set to rise.
In a post-Brexit UK, EU funding of innovation and R&D will dry up. Significant numbers of both start-up and established businesses have benefitted hugely from EU funding of their projects, utilising EU grants and financial schemes to support their business plans and innovative activities.
Whilst this EU-funding-sized hole can’t be entirely filled by the UK government’s R&D Tax Credits scheme, arguably its importance as a financial lifeline, and reward, for innovative businesses is highly likely to grow.
The government introduced the R&D Tax Credits scheme over 18 years ago, and yet according to recent statistics, less than 10% of small- and medium-sized businesses with a legitimate claim have actually applied.
Alongside is the Patent Box scheme, which can reduce Corporation Tax on a qualifying product line to 10%, and is designed to work alongside R&D Tax Credits, it delivers further financial reward to innovative businesses in the UK, and represents another major opportunity for businesses, but to present appears to be almost as equally underused as R&D Tax Credits.
Is this low take-up and under-utilisation down to a lack of understanding and awareness? Probably.
Is it because the R&D Tax scheme is a potential ‘pain point’ for businesses, and one which they see as time consuming? I believe so.
Whether and/or when the UK leaves the EU, with or without a Brexit deal (your guess is as good as mine on that), we need to remain competitive, and innovation is the bedrock of our SME business community retaining its place on the international stage.
The government launched its R&D Tax scheme to support and recognise innovation and R&D across every facet of UK industry. However, the UK’s hands have been tied somewhat on the amount that can be claimed under the SME scheme, because this is seen as significant / generous by the EU, who label it as ‘state aid’. In a post-Brexit world, the UK’s R&D has the potential to be even more valuable and in turn, financial support from government will be more important, more self-determined and, thereby, potentially more appealing too.
With the average claim being worth in the region of £60,000, a huge number of SME’s have already missed out on this financial support that exists to support ongoing / future product and service development activity and cost. It is vital that more businesses are supported in applying for this financial reward for their R&D and innovation, particularly post 29 March or whenever the UK actually leaves the EU.
Luvo is working hard to improve understanding and awareness amongst businesses, so that those that are genuinely entitled to R&D Tax Credits can benefit from the scheme. As part of this we have developed our ‘Top Tips to R&D Tax Credits’ and practical guides to the types of R&D activity that could qualify for government financial support.
Luvo offers a free service to help organisations establish if they are eligible for R&D Tax Credits. In our free, no-obligation, one-hour consultation, one of Luvo’s qualified advisers and R&D Tax experts will advise you if you have a legitimate, valid case to claim. Luvo is a reputable independent specialist firm that works only with businesses that are eligible for R&D Tax Credit claims, as well as Patent Box, and, as such, will only support the most valid of claims. We are proud of our 100% claims success record in making R&D Tax Credit claims for clients, and will always advise companies if their activity is eligible for R&D Tax Credit claims, or not.
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Luvo works predominantly for small and medium sized businesses in a wide variety of industry and market sectors, and also delivers specialist R&D Tax, Patent Box and Capital Allowances advice and claims support to numerous independent accountancy firms and practices. Luvo work on a contingent basis and nothing is charged for any initial discussions or support until an engagement is fully agreed. The firm’s team has achieved a 100% success record in making claims for its clients.