Why firms need to now get serious about accessing the funding they’re entitled to

By PM+M Chartered Accountants

16 Dec 2020

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By Jon Connor, manager in PM+M’s Research Development Tax team.

2020 has been a year like no other. In January, no-one could have imagined how the world and the economy would have been so devastated. However, there is light at the end of the tunnel and businesses are gearing themselves up for a brighter 2021.

In the recent Spending Review, the chancellor made a big deal of the UK’s place on the global stage – especially in terms of the government’s £14.6bn worth of funding investment in the science and technology sectors. It sounds fantastic but given that many manufacturing and engineering companies halted production for at least two to three months, or massively scaled down their R&D projects to focus on standard ‘out the door’ orders, it is likely that R&D claims incorporating a period from 1 April 2020 will be lower than the corresponding year from 1 April 2019.

However, what’s now key is that this investment actually happens and businesses access it. My gut feeling is that automation and robotics firms are likely to be big winners as companies across many sectors will be aiming to ensure that if factory shutdowns do occur in the future then some form of the process can still be undertaken via robotics.

On a broader note, many companies are still not aware of what R&D tax credits they are entitled to. It’s an issue that I come across with new clients on a daily basis. Some of the main reasons include because they perceive their activities are not innovative enough, they haven’t been advised on the benefits of what an R&D claim bring to their company, and because they don’t want to bring their company onto HMRC’s radar. The last reason is one that we as firm don’t agree with as our ‘nothing to hide’ upfront disclosure approach ensures that we get the maximum out of every eligible R&D claim.

The benefits of a successful R&D claim can be game-changing and never more so than now. They deliver cash repayments for loss making companies by funding future technology and development projects; they secure corporation tax savings for profitable companies and corporation tax repayments for backdated claims; and they provide tax relief for projects that may require significant time investment.

Another source of funding which many businesses are still overlooking is the Coronavirus Business Interruption Loan Scheme (CBILS). It was introduced at the start of the pandemic and has helped over 50,000 firms navigate the past few months with over £1bn of loans funded. However, time is running out as the scheme is due to end on 31st January. As I said, things are looking better – especially thanks to the vaccine roll out – but we are not out of the woods.

The first three months of 2021 are expected to be choppy. Imagine a scenario where you suddenly lose your biggest client overnight: What would your business look like? Would you have enough cash reserves to see you through? This is a very real possibility for many companies so it seems nonsensical to not access available funding like this as it would, in all likelihood, secure your long-term future.

To sum up… explore your R&D entitlements and investigate your CIBLS options but make sure you have enough time to go through the application process via an approved lender.

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