News

R&D Tax Incentive Unchanged as Rishi Continues Innovation Push

Jenson Brook

700,000 jobs lost, £280 billion spent, an additional £127 billion planned to be spent on revival, the UK economy shrunk 10%, highest ever borrowing outside wartime… any one of these phrases would be a hard-hitting newspaper headline; the coronavirus pandemic has terrorised the world and now it’s time to recoup, rebuild and recover.

The 2021 Spring Budget was announced on Wednesday 3^rd March 2021, a plan to recover from the largest deflation of the UK’s Gross Domestic Product (“GDP”) in modern history; a steep feat which lies on the shoulders of Rishi Sunak.

Forecasts

Office for Budget Responsibility (“OBR”) forecast the following:

• – UK economy to return to its pre-COVID state by June 2022
• – UK economy to be 3% smaller than originally predicted in 5 years’ time due to coronavirus

UK economy will grow by:

•   – 4% in 2021/22
•   – 7% in 2022/23
•   – 7% in 2023/24
•   – 6% in 2024/25
•   – 7% in 2025/26

Unemployment rate would have peaked at 11.9%, however with the Chancellor’s recovery plan it should peak at 6.5% (1.8m fewer people out of work)

Announcements related to Innovation Funding

• – No changes to the government’s Research and Development (R&D) investment, where they are still planning to have £22 billion per year by 2024 to 2025 to claim from various incentives
• – A new consultation into the R&D tax relief incentive to attract more investment into science, research and technology
• – Corporation Tax to increase from 19% to 25% in April 2023 for companies that generate over £250,000 in profits. For companies generating £50,000 or less in profits, they will remain at 19% Corporation Tax rate. Companies generating between £50,001-249,999 of profits, will be taxed at incremental rates from 19 to 25% Corporation Tax
• – A new ‘super-deduction’ for business investment, with the ability to deduct 130% of the cost against tax on profits
• – A new £40bn UK Infrastructure Bank based in Leeds, investing into green projects throughout the UK
• – UK companies will be able to carry back losses (maximum of £2m) up to 3 years rather than the current 2 year carry back

Please see the full Budget report here.

If you have any questions on the above or would like clarification on any of the initiatives, schemes or amendments within the Spring Budget 2021, please contact Jenson Brook by email at jbrook@walmergroup.com.