In March 2020, the second consultation was published to discuss how to prevent abuse of R&D Tax Schemes by SME claimants. HMRC has identified and prevented a number of fraudulent claims, worth over £300m in total. The review considered the introduction of a cap to prevent fraudulent claims by ineligible businesses and those that re-route R&D costs conducted abroad through a UK business.
The cap was first detailed in Budget 2018 and is currently set to be implemented on the 1st April 2021. As it stands, the amount of SME scheme payable tax credit that a business can receive in any claim period will be subject to a cap of £20,000, plus three times the company’s total PAYE (Pay as Your Earn) and NICs (National Insurance Contributions) liability.
It is clear that this cap will affect some genuine SME claims and the Government are trying to mitigate those effects in a range of ways. Firstly, the government consultations offered an opportunity for stakeholders to provide their feedback and input to try and limit the impact. In addition:
To protect the smallest claims, a threshold of £20,000 will be imposed. Therefore, if a claim is worth less than £20,000 in a single claim period, the PAYE/NICs cap will not apply.
For businesses making a claim for more than £20,000, the maximum claim is calculated by multiplying it’s entire PAYE and NICs liability for that year by three and adding this to the £20,000 threshold (i.e., £20,000 + 3 x PAYE/NICs).
To maximise claims, businesses will be allowed to include the following in their PAYE/NICs cap calculations:
In addition, the claimant company can ignore the cap calculation if they are able to meet both of the following conditions:
Director, Sam Stephens says “The R&D Tax regime is a really important tool for both small and large companies, young and old. The cap that has been introduced to counter abuse but, even after consultation, will affect genuine businesses.
Moving forward, it is more important than ever to understand what shape and size a company’s claim may be and to ensure the right measures are taken to ensure the claim is maximised within the new constraints. Our experts at TBAT are always happy to discuss potential claims and ensure a robust and viable claim is made within the legislation.”
If you need any assistance understanding how this cap may affect your future years R&D Tax Credit claims, our team are here to help! Simply get in touch by completing the form here.
To begin a claim, you can also use our online R&D Tax Credit calculator to work out how much you could receive from HMRC.
The HMRC R&D Tax Credits Statistics have been published for September 2021 and it looks like there is good news regarding the uptake of the two HMRC R&D tax reliefs (SME & RDEC) for the period ending March 2020. Claims continue to be focused around the London and South East areas, representing 35% of companies and 49% of the total claimed in March 2020.
With rising R&D Tax Credit claims and in excess of £5 billion being claimed from HMRC, there are many providers that want to support you to make a claim. This blog post will give you an idea of what to look out for in a good provider and we’ll explore what makes a provider good, bad, and ugly!
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