lady innovation

COVID-19: New funds available for innovative companies

Emma Clewes, Director, Corporate Tax
21/04/2020
lady innovation

The Chancellor announced a support package yesterday for UK companies who are driving innovation. The £1.25 billion government support package includes:

  • a £500 million investment fund, the ‘Future Fund’, for high-growth companies impacted by the crisis, made up of funding from government and the private sector
  • grant and loans of £750 million for SMEs focusing on research and development.

Many of the companies claiming this government support will be eligible to claim R&D Tax relief in respect of their innovative activities. R&D tax relief can be claimed in respect of qualifying expenditure borne by the company in carrying out qualifying R&D activities. Where a company’s R&D projects are subsidised by grants, or other forms of funding, there are some restrictions on the type and amount of expenditure which qualifies for SME R&D relief.

Research and Development Expenditure Credit (RDEC) is generally available where these restrictions apply but is less generous than the SME scheme. The RDEC benefit is currently 10.53% compared to 43.7% for profitable SMEs and 33.35% for loss making SMEs.

The activities that constitute R&D for tax purposes are those activities that seek an advance in knowledge, or capabilities, in the field of science or technology through the resolution of technological uncertainties.

The COVID-19 crisis is proving to be an opportunity for many companies in the UK to demonstrate how they can continue to adapt and innovate. We are seeing many companies adapting their products and processes to make different products, such as with PPE equipment, ventilators and hands-free door openers.

Companies who are taking the lead in adapting to the COVID-19 crisis should make sure that they are not missing out on valuable R&D tax relief and carefully consider the impact of additional government funding on the cash benefit of making a current or historic claim for R&D relief.

If you would like to discuss your company’s activities and understand the impact of making a claim and securing Government funding, please contact us or for more information about R&D tax credits, visit our Research and Development page.

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Stuart Weekes
Stuart Weekes
Partner, Corporate Tax
Thames Valley